What changed in this filing

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Item 1. Financial Statements

2025-11-03 compared with 2025-08-04 · 534 added, 405 removed, 1587 unchanged (37% of the section changed)

FINANCIAL STATEMENTS - (continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)

Six Months Ended June 30,

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - (continued)

Nine Months Ended September 30,

(Dollars in Thousands) 2025 2024

3 unchanged sentences

Transfer from Loans to Other Real Estate Owned — 1,181

Loans Financed to Purchase Other Real Estate Owned 525 —

Transfer from Fixed Assets to Other Real Estate Owned 1,829 —

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

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Accounting Standards Issued but Not Yet Adopted

ASU 2023-09 – Income Taxes — (Topic 740) Improvements to Income Tax Disclosures

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

4 unchanged sentences

The Company is currently evaluating the impact of this guidance on its Consolidated Financial Statements.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

ASU 2024-04 – Debt — Debt with Conversion and Other Options (Subtopic 470-20) Induced Conversions of Convertible Debt Instruments

Accounting Standards Update 2024-04 “Debt - Debt with Conversion and Other Options (Subtopic 470-20)” (“ASU 2024-04”) clarifies wither the settlement of convertible debt, including debt containing cash conversion features at terms that are different from the terms included in the existing debt instrument, should be accounted for as an induced conversion or a debt extinguishment.

1 unchanged sentence

ASU 2024-04 is effective for public business entities January 1, 2026 and is not expected to have a significant impact on the Company’s financial statements.

CARTER BANKSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

ASU 2025-01 & 2024-03 – Income Statement — Reporting Comprehensive Income –Expense Disaggregation Disclosures (Subtopic 220-40)

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This information is generally not presented in the financial statements today.

In January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” The amendment in this [Update][ASU] amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

In January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” The amendment in this Update amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

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This expansion is part of our strategy to expand our footprint in growth markets throughout North Carolina.

The following table summarizes the estimated fair value of the assets acquired, liabilities assumed and consideration transferred in connection with the acquisition (in thousands):

(Dollars in Thousands) June 30, 2025

The following table summarizes the estimated fair value of the assets acquired, liabilities assumed and consideration transferred in connection with the acquisition:

(Dollars in Thousands) September 30, 2025

Total Cash Received From Seller $ 53,077

10 unchanged sentences

Goodwill Recognized 1,193

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Acquired Deposits

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The Company believes that the customer relationships with the deposits acquired have an intangible value.

In connection with the acquisition, the Company recorded a core deposit intangible asset of $ 1.1 million.

The core deposit intangible asset

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

represents the value that the Bank’s core deposits had with their deposit customers.

In connection with the acquisition, the Company recorded a core deposit intangible asset of $ 1.1 million, with a carrying value of $ 1.0 million as of September 30, 2025.

The core deposit intangible asset represents the value that the Bank’s core deposits had with their deposit customers.

The fair value was estimated based on a discounted cash flow methodology based on assumptions that considered the type of deposit, deposit retention and the cost of the deposit base.

The core deposit intangible is being amortized over 10 years on an accelerated basis.

The core deposit intangible is being amortized over ten years on an accelerated basis.

Goodwill is the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed and is the result of the expected operation synergies and other factors.

3 unchanged sentences

Merger Related Costs

During the six months ended June 30, 2025, the Company incurred $ 386 thousand of merger-related costs in connection with the Branch Purchase, primarily for professional fees.

These expenses are recorded in professional and legal fees on the Consolidated Income Statement.

During the nine months ended September 30, 2025, the Company incurred $ 419 thousand of merger-related costs in connection with the Branch Purchase, primarily for professional fees.

These expenses are recorded in professional and legal fees on the Consolidated Statements of Income.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTE 2 – EARNINGS PER COMMON SHARE

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The following table reconciles the numerators and denominators of basic and diluted earnings per common share calculations for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in Thousands, except share and per share data) 2025 2024 2025 2024

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTE 3 - INVESTMENT SECURITIES

The following tables present the amortized cost and fair value of available-for-sale securities at the dates presented:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Amortized

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Total $ 800,741 $ 91 $ ( 82,432 ) $ 718,400

The Company did no t have securities classified as held-to-maturity at June 30, 2025 or December 31, 2024.

The Company did no t have securities classified as held-to-maturity at September 30, 2025 or December 31, 2024.

The following table shows the composition of gross and net realized gains and losses for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in Thousands) 2025 2024 2025 2024

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Tax Impact $ — $ — $ — $ 8

For the three and six months ended June 30, 2025, the Company had no gross or net realized gains and losses.

For the three and nine months ended September 30, 2025, the Company had no gross or net realized gains and losses.

Gains or losses are recognized in earnings on the trade date using the amortized cost of the specific security sold.

4 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The amortized cost and fair value of available-for-sale debt securities are shown below by contractual maturity at the date presented.

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Securities not due at a single maturity date are shown separately.

June 30, 2025

September 30, 2025

(Dollars in Thousands) Amortized

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Total $ 786,629 $ 727,903

At June 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than those securities issued by or collateralized by the U.S.

At September 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than those securities issued by or collateralized by the U.S.

Government and its Agencies, in an amount greater than 10% of shareholders’ equity.

The carrying value of securities pledged for various regulatory and legal requirements was $ 316.4 million at June 30, 2025 and $ 300.1 million at December 31, 2024.

Available-for-sale securities with unrealized losses at June 30, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

June 30, 2025

The carrying value of securities pledged for various regulatory and legal requirements was $ 311.8 million at September 30, 2025 and $ 300.1 million at December 31, 2024.

Available-for-sale securities with unrealized losses at September 30, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

September 30, 2025

Less Than 12 Months 12 Months or More Total

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

December 31, 2024

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Total Debt Securities 26 $ 12,839 $ ( 75 ) 383 $ 639,500 $ ( 82,357 ) 409 $ 652,339 $ ( 82,432 )

The Company did no t record an allowance for credit losses, (“ACL”), on its investment securities during the three or six months ended June 30, 2025 or the year ended December 31, 2024 as the Company did no t have any related impairment.

The Company did no t record an allowance for credit losses, (“ACL”), on its investment securities during the three or nine months ended September 30, 2025 or the year ended December 31, 2024 as the Company did no t have any related impairment.

The Company regularly reviews debt securities for expected credit loss using both qualitative and quantitative criteria, as necessary, based on the composition of the portfolio at period end.

As of June 30, 2025, management does not intend to sell any security in an unrealized loss position and it is not more than likely that it will be required to sell any such security before the recovery of its amortized cost basis.

As of September 30, 2025, management does not intend to sell any security in an unrealized loss position and it is not more than likely that it will be required to sell any such security before the recovery of its amortized cost basis.

The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations, general financial market uncertainty and market volatility.

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The Company determined the unrealized losses detailed in the table above are not related to credit;

therefore, no ACL has been recognized on the Company’s securities.

Should the impairment of any of these securities become credit related, the impairment will be recognized by establishing an ACL through (recovery) provision for credit losses in the period the credit related impairment is identified, while any non-credit loss will be recognized in accumulated other comprehensive loss, net of applicable taxes.

During the three and six months ended June 30, 2025 and June 30, 2024, the Company had no credit related net investment impairment losses.

therefore, no ACL has been recognized on the Company’s investment securities.

Should the impairment of any of these securities become credit related, the impairment will be recognized by establishing an ACL through provision (recovery) for credit losses in the period the credit related impairment is identified, while any non-credit loss will be recognized in accumulated other comprehensive loss, net of applicable taxes.

During the three and nine months ended September 30, 2025 and September 30, 2024, the Company had no credit related net investment impairment losses.

Equity Securities

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The Company’s investment in the mutual fund is eligible for investment credit under the Community Reinvestment Act.

During the three and six months ended June 30, 2025, the Company recognized an unrealized fair value gain of $ 22 thousand and $ 159 thousand on these equity securities.

During the three and six months ended June 30, 2024 the Company purchased $ 5.0 million of equity securities with a carrying value totaling $ 5.1 million and recognized an unrealized fair value gain of

During the three and nine months ended September 30, 2025, the Company recognized an unrealized fair value gain of $ 69 thousand and $ 228 thousand on these equity securities.

During the three and nine months ended September 30, 2024 the Company purchased $ 5.0 million of equity securities with a carrying value totaling $ 5.2 million and recognized an unrealized

CARTER BANKSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

$ 63.3 thousand on these equity securities.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

fair value gain of $ 181.5 thousand and $ 207.1 thousand, respectively, on these equity securities.

This unrealized fair value gain is recorded in other noninterest income on the Consolidated Statements of Income.

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The composition of the loan portfolio by dollar amount is shown in the table below at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

Commercial Real Estate $ 2,063,181 $ 1,869,831

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Loan Restructurings

The following table shows the amortized cost basis as of June 30, 2025 and June 30, 2024 for the loans restructured during the three and six months ended June 30, 2025 and June 30, 2024 to borrowers experiencing financial difficulty, disaggregated by portfolio segment:

The following table shows the amortized cost basis as of September 30, 2025 and September 30, 2024 for the loans restructured during the three and nine months ended September 30, 2025 and September 30, 2024 to borrowers experiencing financial difficulty, disaggregated by portfolio segment.

The Company had no restructured loans to borrowers experiencing financial difficulty during the three months ended September 30, 2025:

Restructured Loans

Three Months Ended June 30, 2025 Six Months Ended June 30, 2025

Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025

(Dollars in Thousands) Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Restructured Loans

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

(Dollars in Thousands) Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable

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The Bank closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table shows the performance of loans that have been modified during the six months ended June 30, 2025 and 2024:

As of June 30, 2025 As of June 30, 2024

Payment Status (Amortized Cost Basis) Payment Status (Amortized Cost Basis)

(Dollars in Thousands) Current 30-89 Days Past Due 90+ Days Past Due Current 30-89 Days Past Due 90+ Days Past Due

The following table shows the performance of loans that were modified during the nine months ended September 30, 2025 and 2024:

As of September 30, 2025 As of September 30, 2024

Payment Status (Amortized Cost Basis)

(Dollars in Thousands) Current 30-89 Days Past Due 90+ Days Past Due Total Current 30-89 Days Past Due 90+ Days Past Due Total

Accruing Restructured Loans

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents the amortized cost of modified loans to borrowers experiencing financial difficulty by portfolio segment and type of modification during the periods presented.

Three Months Ended June 30, 2025

(Dollars in Thousands) Payment Delay Accelerated Maturity Date/Modified Rate Term Extension/Payment Delay Short-term Extension Total % of Total Class of Financing Receivable

The Company had no restructured loans to borrowers experiencing financial difficulty during the three months ended September 30, 2025.

Nine Months Ended September 30, 2025

(Dollars in Thousands) Payment Delay Short-term Extension / Modified Rate Total % of Total Class of Financing Receivable

Commercial Real Estate $ — $ — $ — — %

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Total $ 5,121 $ 229,520 $ 234,641 6.12 %

Six Months Ended June 30, 2025

(Dollars in Thousands) Payment Delay Accelerated Maturity Date/Modified Rate Term Extension/Payment Delay Short-term Extension Total % of Total Class of Financing Receivable

Three Months Ended September 30, 2024

(Dollars in Thousands) Principal Deferral Accelerated Maturity Date/Modified Rate Total % of Total Class of Financing Receivable

Commercial Real Estate $ — $ — $ — — %

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Total $ 13,604 $ 2,106 $ 15,710 4.91 %

Three and Six Months Ended June 30, 2024

(Dollars in Thousands) Term Extension/Payment Delay Term Extension/Payment Delay/Interest Rate Reduction Total % of Total Class of Financing Receivable

Nine Months Ended September 30, 2024

(Dollars in Thousands) Principal Deferral Accelerated Maturity Date/Modified Rate Term Extension/Payment Delay Term Extension/Payment Delay/Interest Rate Reduction Total % of Total Class of Financing Receivable

Commercial Real Estate $ — $ — $ 434 $ — $ 434 0.02 %

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Total $ 13,604 $ 2,106 $ 434 $ 280,905 $ 297,049 93.75 %

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table describes the effect of loan modifications made to borrowers experiencing financial difficulty during the periods presented:

Three Months Ended June 30, 2025

(Dollars in Thousands) Weighted-Average Payment Delay Weighted-Average Term Extension/Payment Delay

Commercial and Industrial — 0.07 years

Other — 0.24 years

Six Months Ended June 30, 2025

(Dollars in Thousands) Weighted-Average Payment Delay Weighted-Average Term Extension/Payment Delay

Nine Months Ended September 30, 2025

Weighted-Average Payment Delay Weighted-Average Modified Rate Weighted-Average Short-term Extension Weighted-Average Interest Rate Reduction

Commercial and Industrial — 2.29 % 0.59 years — %

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Other — — % 0.86 years 0.04 %

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Three and Six Months Ended June 30, 2024

(Dollars in Thousands) Weighted-Average Term Extension/Payment Delay Weighted-Average Interest Rate Reduction

Three Months Ended September 30, 2024

Weighted-Average Principal Deferral Weighted-Average Accelerated Maturity Date Weighted-Average Modified Rate

Commercial Real Estate — — — %

Commercial and Industrial 0.58 years — — %

Residential Mortgages — 19.26 years 4.63 %

Other Consumer — — — %

Construction — — — %

Other — — — %

Nine Months Ended September 30, 2024

Weighted-Average Principal Deferral Weighted-Average Accelerated Maturity Date Weighted-Average Modified Rate Weighted-Average Term Extension/Payment Delay Weighted-Average Interest Rate Reduction

Commercial Real Estate — — — % 4.91 years — %

Commercial and Industrial 0.58 years — — % — — %

Residential Mortgages — 19.26 years 4.63 % — — %

Other — — — % 2.58 years 0.66 %

Commitments to lend additional funds on one restructured loan as of June 30, 2025 totaled $ 4.8 million.

Commitments to lend additional funds on one restructured loan as of September 30, 2025 totaled $ 4.1 million.

As of December 31, 2024, the Bank had no commitments to lend any additional funds on restructured loans.

As of June 30, 2025 and June 30, 2024 the Bank had no loans that defaulted during the period and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.

As of September 30, 2025 and September 30, 2024 the Bank had no loans that defaulted during the period and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.

For purposes of this disclosure, a default occurs when, within 12 months of the original modification, either a full or partial charge-off occurs or the loan becomes 90 days or more past due.

As of June 30, 2025 and December 31, 2024, the Company had $ 2.0 million and $ 0.4 million, respectively, of residential real estate in the process of foreclosure.

We also had no residential real estate included in other real estate owned (“OREO”) at June 30, 2025 or at December 31, 2024, respectively.

As of September 30, 2025 and December 31, 2024, the Company had $ 2.0 million and $ 0.4 million, respectively, of residential real estate in the process of foreclosure.

We had no residential real estate included in other real estate owned (“OREO”) at September 30, 2025 or at December 31, 2024, respectively.

NOTE 5 - ALLOWANCE FOR CREDIT LOSSES

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CRE loans are secured by commercial purpose real estate, including both owner occupied properties and investment properties, for various purposes such as hotels, strip malls and apartments.

Operations of the individual projects as well as global cash flows of the debtors are the primary sources of repayment for these loans.

Operations of the individual projects as well as global cash

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

flows of the debtors are the primary sources of repayment for these loans.

The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type as well as the business.

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The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

CARTER BANKSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Construction loans include both commercial and consumer.

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The peaks and troughs of these forecasts serve as guardrails for potential subjective adjustments.

In addition to considering the outcomes based on the range of forecasts, management recognizes that the assumptions used in economic forecasts may not perfectly align with our market area, risk profile or unique attributes of our portfolio along with other important considerations.

In addition to

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

considering the outcomes based on the range of forecasts, management recognizes that the assumptions used in economic forecasts may not perfectly align with our market area, risk profile or unique attributes of our portfolio along with other important considerations.

Severe changes in forecasts can also create significant variability and management must assess not only the absolute balance of reserves but also consider the appropriateness of the velocity of change.

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1) credit quality of the loan portfolio, 2) compliance with the loan policy, 3) adequacy of documentation in credit files and 4) validity of risk ratings.

Since 2020 and continuing through 2025, the Company used a five step approach for loan review in the following categories:

Since 2020 and continuing through 2025, the Company used a four step approach for loan review in the following categories:

• Individual reviews of the top twenty large loan relationships (“LLRs”), which are defined as any individual commercial loan or aggregate commercial relationship totaling $ 2.0 million or more;

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• A sampling review of commercial loans up to $ 10 million in commitment;

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

• Focus reviews of micro commercial loans defined as $ 2.0 million or less, to evaluate emerging risk rather than individual loan risk.

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Due to the greater potential for loss within our commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system.

Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies.

Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss.

The loan portfolio has not yet been significantly impacted by tariffs or other actual or potential changes in trade policies, but potential supply chain disruption and commodity price volatility present addition risk to the loan portfolio.

Loan risk ratings are assigned based upon the creditworthiness of the borrower and are

CARTER BANKSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of June 30:

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

reviewed on an ongoing basis according to our internal policies.

Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss.

The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of September 30:

(Dollars in Thousands) 2025 2024 2023 2022 2021 2020 and Prior Revolving Total Portfolio Loans

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of December 31:

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YTD Gross Charge-offs $ 15,250 $ 120 $ 966 $ 399 $ 45 $ 208 $ — $ 16,988

The Bank’s largest credit relationship was nonperforming and rated as substandard at June 30, 2025 and December 31, 2024 with an aggregate principal balance of $ 235.5 million and $ 252.0 million at June 30, 2025 and December 31, 2024, respectively.

The Bank’s largest credit relationship was nonperforming and rated as substandard at September 30, 2025 and December 31, 2024 with an aggregate principal balance of $ 228.6 million and $ 252.0 million at September 30, 2025 and December 31, 2024, respectively.

CARTER BANKSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of June 30:

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of September 30:

(Dollars in Thousands) 2025 2024 2023 2022 2021 2020 and Prior Revolving Total Portfolio Loans

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of December 31:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Age Analysis of Past-Due Loans by Class

The following tables include an aging analysis of the recorded investment of past-due portfolio loans at the dates presented:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Current Loans Loans 30-59

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Total $ 3,360,649 $ 4,680 $ 148 $ 4,828 $ 259,349 $ 3,624,826

Loans past due 90 days or more and still accruing are automatically transferred to nonaccrual status and were zero at June 30, 2025 and December 31, 2024, respectively.

There were no nonaccrual or past due loans related to loans held-for-sale as of June 30, 2025 and December 31, 2024, respectively.

The following table presents loans on nonaccrual status and loans past due 90 days or more and still accruing by portfolio segment of loan at the dates presented.

Loans past due 90 days or more and still accruing are automatically transferred to nonaccrual status and were zero at September 30, 2025 and December 31, 2024, respectively.

There were no nonaccrual or past due loans related to loans held-for-sale as of September 30, 2025 and December 31, 2024, respectively.

The following table presents loans on nonaccrual status by portfolio segment at the dates presented.

There were no loans at the dates presented that were past due more than 90 days and still accruing.

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(Dollars in Thousands)

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We may also elect to retain a loan that is 90 or more days’ delinquent in accrual status if we believe the loan is well secured and in the process of collection.

Nonaccrual loans and loans that have been characterized as restructured

Nonaccrual loans and loans that have been characterized as restructured loans may be individually evaluated for credit losses in the Allowance for Credit Losses model if the loan commitment is

CARTER BANKSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

loans may be individually evaluated for credit losses in the Allowance for Credit Losses model if the loan commitment is $ 1.0 million or greater and/or based on management’s discretion, unless we elect to maintain the loan in the general pool.

During the three and six months ended June 30, 2025 and June 30, 2024, respectively, no material amount of interest income was recognized on nonperforming loans subsequent to their classification as nonperforming loans.

The following table presents the amortized cost basis of individually evaluated loans at the dates presented.

Changes in the fair value of the types of collateral and discounted cash flow modeling for individually evaluated loans are reported in the (recovery) provision for credit losses on loans in the period of change.

June 30, 2025

Collateral Type Warehouse Equipment Single Family Discounted Cash Flow Total

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

$ 1.0 million or greater and/or based on management’s discretion, unless we elect to maintain the loan in the general pool.

During the three and nine months ended September 30, 2025 and September 30, 2024, respectively, no material amount of interest income was recognized on nonperforming loans subsequent to their classification as nonperforming loans.

The following tables present the amortized cost basis of individually evaluated loans at the dates presented.

Changes in the fair value of the types of collateral and discounted cash flow modeling for individually evaluated loans are reported in the provision (recovery) for credit losses on loans in the period of change.

September 30, 2025

Collateral Type Warehouse Equipment Single Family Office Building Discounted Cash Flow Total

(Dollars in Thousands) Fair Value - Collateral

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Total $ 1,026 $ 2,053 $ 251,982 $ 255,061

The following tables presents activity in the ACL for the periods presented:

Three Months Ended June 30, 2025

The following tables present activity in the ACL for the periods presented:

Three Months Ended September 30, 2025

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

6 unchanged sentences

Balance, End of Period $ 22,247 $ 2,631 $ 12,518 $ 685 $ 13,962 $ 21,719 $ 73,762

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

8 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Three Months Ended June 30, 2024

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Three Months Ended September 30, 2024

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

6 unchanged sentences

Balance, End of Period $ 20,067 $ 2,936 $ 10,520 $ 724 $ 9,742 $ 36,920 $ 80,909

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

1 unchanged sentence

Balance, Beginning of Year $ 19,873 $ 3,286 $ 10,879 $ 868 $ 7,792 $ 54,354 $ 97,052

(Recovery) Provision for Credit Losses on Loans ( 56 ) ( 75 ) ( 132 ) 589 1,581 ( 1,400 ) 507

Provision (Recovery) for Credit Losses on Loans 194 ( 313 ) ( 356 ) 877 2,107 ( 2,434 ) 75

Charge-offs — ( 40 ) ( 32 ) ( 1,389 ) ( 157 ) ( 15,000 ) ( 16,618 )

19 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

16 unchanged sentences

This valuation method is classified as Level 1 in the fair value hierarchy.

As of June 30, 2025, Level 1 fair values are available for each of the Company’s equity securities.

As of September 30, 2025 and December 31, 2024, Level 1 fair values are available for each of the Company’s equity securities.

Derivative Financial Instruments and Hedging Activities:

11 unchanged sentences

These fair value hedges were utilized to convert the hedged loans from a fixed rate to a synthetic floating Secured Overnight Financing Rate (“SOFR”).

As long as a hedging instrument was designated and the results of the effectiveness testing support that the instrument qualified for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument were accounted for in net interest income.

As long as a hedging instrument was designated and the results of the effectiveness testing supported that the instrument qualified for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument were accounted for in net interest income.

The fair value of the hedge was recorded in either other assets or in other liabilities depending on the position of the hedge, and the offset was recorded in loans.

2 unchanged sentences

Rather, the full impact of hedge gains and losses was recognized in the period in which the hedged transactions had an impact to earnings.

As of June 30, 2025, the Company had since terminated all its Pay-Fixed Swap Agreements.

As of September 30, 2025, the Company had terminated all its Pay-Fixed Swap Agreements.

The Company also enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding (“rate lock commitments”).

3 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

15 to 90 days.

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OREO and other repossessed assets marked to fair value are classified as Level 3.

At June 30, 2025 OREO assets were in compliance with the OREO policy as set forth above, and substantially all of the assets were listed for sale with credible third-party real estate brokers.

At September 30, 2025 OREO assets were in compliance with the OREO policy as set forth above, and substantially all of the assets were listed for sale with credible third-party real estate brokers.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at the dates presented:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Carrying Value Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

34 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

We have invested in subordinated debt of other financial institutions.

We have two securities totaling $ 7.9 million that are considered to be Level 3 securities at June 30, 2025 and two totaling $ 7.8 million at December 31, 2024, attributable to the calculated change in fair value of $ 0.1 million.

We have two securities totaling $ 8.3 million that are considered to be Level 3 securities at September 30, 2025 and two totaling $ 7.8 million at December 31, 2024, attributable to the calculated change in fair value of $ 0.5 million.

The Level 3 fair value is benchmarked to other securities that have observable market values in Level 2 using comparable financial ratio analysis specific to the industry in which the underlying company operates.

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Financial assets measured at fair value on a nonrecurring basis at the dates presented are summarized below:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Level 1 Level 2 Level 3 Fair Value

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Individually Evaluated Loans $ — $ — $ 579 $ 579

The Company had one C&I individually evaluated loan totaling $ 0.5 million and $ 0.6 million measured at fair value on a nonrecurring basis as of June 30, 2025 and at December 31, 2024, respectively.

The Company’s largest credit relationship is classified as an individually evaluated loan with a net carrying amount totaling $ 211.5 million at June 30, 2025 and $ 221.7 million at December 31, 2024.

The Company utilized various cash flow and discounting assumptions in the alternative modeling, instead of fair value, which resulted in a valuation allowance of $ 24.0 million at June 30, 2025 and $ 30.3 million at December 31, 2024.

When evaluating the net carrying value of this credit relationship at June 30, 2025, the Company utilized discounted cash flow valuation techniques to estimate the timing and magnitude of potential recoveries resulting from various collection processes.

OREO, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $ 1.7 million as of June 30, 2025, compared with $ 0.7 million at December 31, 2024.

This increase was primarily due to three closed branches being transferred to OREO, partially offset by the sale of one of these closed branches during the second quarter of 2025.

The Company had $ 0.4 million and $ 0.5 million write-downs recorded on OREO for the three and six months ended June 30, 2025 and had zero write-downs recorded on OREO for the three and six months ended June 30, 2024.

The Company had two loan relationships totaling $ 8.8 million and and one relationship of $ 0.6 million measured at fair value on a nonrecurring basis as of September 30, 2025 and at December 31, 2024, respectively.

The increase in individually evaluated loans measured at fair value from December 31, 2024, was primarily related to one loan relationship.

The Company’s largest credit relationship is classified as an individually evaluated loan with a net carrying amount totaling $ 206.9 million at September 30, 2025 and $ 221.7 million at December 31, 2024.

The Company utilized various cash flow and discounting assumptions in the alternative modeling, instead of fair value, which resulted in a valuation allowance of $ 21.7 million at September 30, 2025 and $ 30.3 million at December 31, 2024.

When evaluating the net carrying value of this credit relationship at September 30, 2025, the Company utilized discounted cash flow valuation techniques to estimate the timing and magnitude of potential recoveries resulting from various collection processes.

OREO, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $ 0.3 million as of September 30, 2025, compared with $ 0.7 million at December 31, 2024.

This decrease was primarily due to three closed branches being transferred to OREO and sold during the nine months ending September 30, 2025 in addition to the sale of another closed branch previously added to OREO.

The Company had zero and $ 0.5 million write-downs recorded on OREO for the three and nine months ended September 30, 2025 and had zero write-downs recorded on OREO for the three and nine months ended September 30, 2024.

These write-downs are recorded in other noninterest expense on the Consolidated Statements of Income.

The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis at the dates presented:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Fair Value Valuation Technique Unobservable Inputs Weighted Range Average

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

December 31, 2024

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Management considers the unique attributes and characteristics of each specific individually evaluated loan and may use judgment to adjust the baseline discount rate when appropriate.

The carrying values and estimated fair values of our financial instruments at June 30, 2025 and December 31, 2024 are presented in the following tables.

Fair values for June 30, 2025 and December 31, 2024 are estimated under the exit price notion in accordance with ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.”

The carrying values and estimated fair values of our financial instruments at September 30, 2025 and December 31, 2024 are presented in the following tables.

Fair values for September 30, 2025 and December 31, 2024 are estimated under the exit price notion in accordance with ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.”

GAAP requires disclosure of fair value information about financial instruments carried at book value on the Consolidated Balance Sheets.

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Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Fair Value Measurements at June 30, 2025

Fair Value Measurements at September 30, 2025

(Dollars in Thousands) Carrying Value Level 1 Level 2 Level 3 Total

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Fair Value Measurements at December 31, 2024

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Based upon current positions and related future collateral requirements relating to them, management believes any effect on our cash flow or liquidity position to be immaterial.

Derivatives contain an element of credit risk, the possibility that the Company will incur a loss because a counterparty, which may be a financial institution or a customer, fails to meet its contractual obligations.

All derivative contracts with financial

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

institutions may be executed only with counterparties approved by the Asset and Liability Committee (“ALCO”) and all derivatives with customers are approved by a team of members from senior management who have been trained to understand the risk associated with interest rate swaps and have past industry experience.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

All derivative contracts with financial institutions may be executed only with counterparties approved by the Asset and Liability Committee (“ALCO”) and all derivatives with customers are approved by a team of members from senior management who have been trained to understand the risk associated with interest rate swaps and have past industry experience.

Interest rate swaps are considered derivatives but are not accounted for using hedge accounting.

As such, changes in the estimated fair value of the derivatives are recorded in current earnings in the Consolidated Statements of Income.

The following table indicates the amounts representing the fair value of derivative assets and derivative liabilities at the dates presented:

The following tables indicate the amounts representing the fair value of derivative assets and derivative liabilities at the dates presented:

Fair Values of Derivative Instruments

Asset Derivatives (Included in Other Assets)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(Dollars in Thousands) Number of

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Liability Derivatives (Included in Other Liabilities)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(Dollars in Thousands) Number of

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Total Derivatives 64 $ 360,842 $ 10,888 60 $ 494,716 $ 17,710

The following table indicates the (loss) income recognized within “other noninterest income” in the Consolidated Statements of Income for derivatives as of the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

The following table indicates the loss recognized within “other noninterest income or expense” for derivatives not designated as hedging instruments and the income (loss) within “interest income on taxable loans” for derivatives designated as hedging instruments in the Consolidated Statements of Income as of the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in Thousands) 2025 2024 2025 2024

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Interest Rate Swaps - Balance Sheet Hedge $ — $ 103 $ ( 140 ) $ 103

Total Derivative Loss Designated as Hedging Instruments $ — $ — $ ( 140 ) $ —

Total Derivative Income (Loss) Designated as Hedging Instruments $ — $ 103 $ ( 140 ) $ 103

Derivatives not Designated as Hedging Instruments

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Interest Rate Swap Contracts – Commercial Loans ( 11 ) ( 128 ) ( 107 ) ( 112 )

Total Derivative (Loss) Income not Designated as Hedging Instruments $ ( 52 ) $ 2 $ ( 96 ) $ 16

Net Derivative (Loss) Income $ ( 52 ) $ 2 $ ( 236 ) $ 16

Total Derivative Loss not Designated as Hedging Instruments $ ( 11 ) $ ( 128 ) $ ( 107 ) $ ( 112 )

Net Derivative Loss $ ( 11 ) $ ( 25 ) $ ( 247 ) $ ( 9 )

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Presenting offsetting derivatives that are subject to legally enforceable netting arrangements with the same party is permitted.

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(Included in Other Assets) (Included in Other Liabilities)

(Dollars in Thousands) June 30, 2025 December 31, 2024 June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024 September 30, 2025 December 31, 2024

Derivatives Designated as Hedging Instruments

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The following table presents the composition of deposits at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

Noninterest-Bearing Demand $ 606,203 $ 634,436

2 unchanged sentences

Savings 335,502 355,506

Certificates of Deposits 1,893,611 1,924,370

Certificates of Deposit 1,906,551 1,924,370

Total $ 4,210,347 $ 4,153,421

All depos i t accounts are i nsured by the Federal Deposit Insurance Corporation (“FDIC”) u p to the maximum amount allowed by l aw.

Certificates of deposits that exceed the FDIC Insurance limit of $250,000 at June 30, 2025 and December 31, 2024 were $ 300.2 million and $ 297.9 million, respectively.

At June 30, 2025 and December 31, 2024, total brokered deposits (excluding the Certificate of Deposit Account Registry Services (“CDARS”) and ICS two-way) were $ 196.1 million, respectively, which are included within the “certificates of deposit” line item in the Consolidated Balance Sheet.

Certificates of deposits that exceed the FDIC Insurance limit of $250,000 at September 30, 2025 and December 31, 2024 were $ 308.3 million and $ 297.9 million, respectively.

At both September 30, 2025 and December 31, 2024, total brokered deposits (excluding the Certificate of Deposit Account Registry Services (“CDARS”) and ICS two-way) were $ 196.1 million, which are included within the “certificates of deposit” line item in the Consolidated Balance Sheets.

Certificates of Deposit maturing as of the date presented:

(Dollars in Thousands) June 30, 2025

(Dollars in Thousands) September 30, 2025

3 Months or Less $ 630,814

3 unchanged sentences

Total $ 1,906,551

Overdrafts reclassified to loans were $ 0.3 million at June 30, 2025 and December 31, 2024, respectively.

Overdrafts reclassified to loans were $ 0.3 million at both September 30, 2025 and December 31, 2024.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTE 9 – FEDERAL HOME LOAN BANK BORROWINGS AND FEDERAL FUNDS PURCHASED

Borrowings serve as an additional source of liquidity for the Company.

The Company had $ 113.5 million of Federal Home Loan Bank (“FHLB”) borrowings at June 30, 2025 and $ 70.0 million at December 31, 2024.

The Company had $ 175.5 million of Federal Home Loan Bank (“FHLB”) borrowings at September 30, 2025 and $ 70.0 million at December 31, 2024.

The increase of $ 105.5 million is due to additional FHLB borrowings to fund loan growth.

FHLB borrowings are fixed and variable rate advances for various terms and are secured by a blanket lien on select residential mortgages, select multifamily loans, and select commercial real estate loans.

Variable rate FHLB borrowings were 60.4 % and 0.0 % of total borrowings at June 30, 2025 or December 31, 2024, respectively.

Variable rate FHLB borrowings were 51.6 % and 0.0 % of total borrowings at September 30, 2025 or December 31, 2024, respectively.

The FHLB charges prepayment fees for advances that are repaid before maturity, which is the net present value between current market rates and the fixed rate on each borrowing.

Total loans pledged as collateral were $ 1.6 billion at both June 30, 2025 and December 31, 2024.

There were no securities available-for-sale pledged as collateral at June 30, 2025 or December 31, 2024.

At June 30, 2025, funding sources accessible to the Company include borrowing availability at the FHLB, equal to 25 % of the Company’s assets or approximately $ 1.2 billion, subject to the amount of eligible collateral pledged, of which the Company is eligible to borrow up to an additional $ 732.0 million.

Total loans pledged as collateral were $ 1.3 billion at September 30, 2025 and $ 1.6 billion at December 31, 2024.

There were no securities available-for-sale pledged as collateral at September 30, 2025 or December 31, 2024.

At September 30, 2025, funding sources accessible to the Company include borrowing availability at the FHLB, equal to 25 % of the Company’s assets or approximately $ 1.2 billion, subject to the amount of eligible collateral pledged, of which the Company is eligible to borrow up to an additional $ 544.0 million.

The Company had the capacity to borrow up to an additional $ 735.3 million from the FHLB at December 31, 2024.

At June 30, 2025 and at December 31, 2024, the Company had $ 30.0 million unsecured facilities with three other correspondent financial institutions, as well as, a $ 45.0 million fully secured facility with one other correspondent financial institution.

At September 30, 2025 and at December 31, 2024, the Company had $ 30.0 million unsecured facilities with three other correspondent financial institutions, as well as, a $ 45.0 million fully secured facility with one other correspondent financial institution.

The Company did not have outstanding borrowings on these facilities as of September 30, 2025 or December 31, 2024.

The Company also has access to the institutional certificate of deposit (“CD”) and brokered deposit markets.

The Company did not have outstanding borrowings on these facilities as of June 30, 2025 or December 31, 2024.

The following table represents the balance of FHLB borrowings, the weighted average interest rate and the borrowing availability at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

FHLB Borrowings $ 175,500 $ 70,000

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The following table represents the balance of federal funds purchased, the weighted average interest rate and the borrowing availability at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

Federal Funds Purchased $ — $ —

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Federal Funds Purchased Availability $ 75,000 $ 75,000

Scheduled annual maturities and weighted average interest rates for FHLB borrowings for each of the five years subsequent to June 30, 2025 and thereafter are as follows:

Scheduled annual maturities and weighted average interest rates for FHLB borrowings for each of the five years subsequent to September 30, 2025 and thereafter are as follows:

(Dollars in Thousands) Balance Weighted Average Rate

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NOTE 10 – COMMITMENTS AND CONTINGENCIES

Commitments to extend credit, which amounted to $ 729.7 million at June 30, 2025 and $ 833.6 million at December 31, 2024, represent agreements to lend to customers with fixed expiration dates or other termination clauses.

The Company provides lines of credit to our clients to finance the completion of construction projects and revolving lines of credit to operating companies to

Commitments to extend credit, which amounted to $ 782.6 million at September 30, 2025 and $ 833.6 million at December 31, 2024, represent agreements to lend to customers with fixed expiration dates or other termination clauses.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

finance their working capital needs.

Lines of credit for construction projects represented $ 394.2 million, or 54.0 %, and $ 445.3 million, or 53.4 %, of the commitments to extend credit at June 30, 2025 and December 31, 2024, respectively.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

provides lines of credit to our clients to finance the completion of construction projects and revolving lines of credit to operating companies to finance their working capital needs.

Lines of credit for construction projects represented $ 449.4 million, or 57.4 %, and $ 445.3 million, or 53.4 %, of the commitments to extend credit at September 30, 2025 and December 31, 2024, respectively.

Standby letters of credit are conditional commitments issued by the Company guaranteeing the performance of a customer to a third-party.

Those guarantees are primarily issued to support public and private borrowing arrangements.

The Company had outstanding letters of credit totaling $ 15.3 million at June 30, 2025 and $ 16.7 million at December 31, 2024.

(Dollars in Thousands) June 30, 2025 December 31, 2024

The Company had outstanding letters of credit totaling $ 17.4 million at September 30, 2025 and $ 16.7 million at December 31, 2024.

(Dollars in Thousands) September 30, 2025 December 31, 2024

Commitments to Extend Credit $ 782,646 $ 833,594

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The following table presents activity in the life-of-loss reserve for unfunded loan commitments as of and for the dates presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in Thousands) 2025 2024 2025 2024

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Balance at beginning of period $ 2,737 $ 2,914 $ 3,186 $ 3,193

Recovery for Unfunded Commitments ( 335 ) ( 236 ) ( 449 ) ( 279 )

Provision (Recovery) for Unfunded Commitments 335 191 ( 114 ) ( 88 )

Balance at end of period $ 3,072 $ 3,105 $ 3,072 $ 3,105

Amounts are added or subtracted to the recovery for unfunded commitments through a credit or charge to current earnings in the recovery for unfunded commitments.

Recoveries of $ 335 thousand and $ 449 thousand were recorded for the three and six months ended June 30, 2025, respectively, for unfunded commitments, which were decreases of $ 99 thousand and $ 170 thousand, respectively, compared to the same periods in 2024.

Amounts are added to or subtracted from the reserve for unfunded commitments through a credit or charge to current earnings in the provision (recovery) for unfunded commitments.

The reserve for unfunded commitments fluctuates primarily based upon levels of construction commitments in the comparative periods.

Legal Proceedings

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTE 11 – TAX EFFECTS ON OTHER COMPREHENSIVE INCOME

The following table presents the change in components of other comprehensive income for the periods presented, net of tax effects:

Three Months Ended June 30, 2025 Six Months Ended June 30, 2025

The following tables present the change in components of other comprehensive income for the periods presented, net of tax effects:

Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025

(Dollars in Thousands) Pre-Tax

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Other Comprehensive Income $ 7,968 $ ( 1,771 ) $ 6,197 $ 23,615 $ ( 5,147 ) $ 18,468

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

(Dollars in Thousands) Pre-Tax

Amount Tax (Expense) Benefit Net of Tax

Amount Tax Expense Net of Tax

Amount Pre-Tax

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The following is a reconciliation of the differences between income tax provision and the amount computed by applying the statutory federal income tax rate to income before taxes for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before taxes.

The Company ordinarily generates an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, tax-exempt income from bank-owned life insurance, and tax benefits resulting from certain partnership investments.

During the six months ended June 30, 2025, tax-exempt bank owned life insurance income increased primarily due to a $ 1.9 million tax-free bank owned life insurance (“BOLI”) death benefit recorded in the first quarter of 2025.

The Company ordinarily generates an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, tax-exempt income from bank owned life insurance (“BOLI”), and tax benefits resulting from certain partnership investments.

During the nine months ended September 30, 2025, tax-exempt bank owned life insurance income increased primarily due to a $ 1.9 million tax-free BOLI death benefit recorded in the first quarter of 2025.

In addition, the increase in Other primarily related to a $ 1.2 million taxable gain on a surrender of BOLI policies and a resulting $ 0.1 million Modified Endowment Contract (“MEC”) penalty.

The Company elected to adopt the proportional amortization method of accounting for all qualifying equity investments within the historic tax credits (“HTC”) program.

The Company makes equity investments as a limited partner in various partnerships that sponsor HTC as a strategic tax initiative designed to receive income tax credits and other income tax benefits, such as deductible flow-through losses.

As of June 30, 2025 and December 31, 2024, the Company recognized $ 0.8 million and $ 1.1 million, respectively, in HTC equity investments recorded as a component of other assets on the Consolidated Balance Sheets.

As of September 30, 2025 and December 31, 2024, the Company recognized $ 0.6 million and

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

$ 1.1 million, respectively, in HTC equity investments recorded as a component of other assets on the Consolidated Balance Sheets.

The Company records income tax credits and other income tax benefits received from its HTC investments as a component of the income tax provision on the Consolidated Statements of Income and as a component of operating activities on the Consolidated Statements of Cash Flows.

1 unchanged sentence

The Company records non-income-tax-related activity and other returns received from its HTC investments as a component of other noninterest income on the Consolidated Statements of Income and as a component of operating activities on the Consolidated Statements of Cash Flows.

As of June 30, 2025 and June 30, 2024, the Company has not recognized any non-income-tax-related activity from its HTC investments.

As of September 30, 2025 and September 30, 2024, the Company has not recognized any non-income-tax-related activity from its HTC investments.

On July 4, 2025, the President signed H.R.

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The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense.

The Company is current evaluating the impact on future periods.

The Company is currently evaluating the impact on future periods.

NOTE 13 – STOCK REPURCHASE PLAN

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The repurchase program does not obligate the Company to purchase any particular number of shares.

During the six months ended June 30, 2025, the Company repurchased 547,332 shares of its common stock at a total cost of $ 9.1 million and an weighted average cost per share of $ 16.70 .

During the three and nine months ended September 30, 2025, the Company repurchased 262,269 and 809,601 shares of its common stock at a total cost of $ 4.9 million and $ 14.0 million, respectively, and at a weighted average cost per share of $ 18.70 and $ 17.35 , respectively.

NOTE 14 - SEGMENT REPORTING

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Loans, investments and deposits provide the revenues, net in the community bank’s operation.

Interest expense, (recovery) provision for credit losses and salaries and benefits provide the significant expenses in the community bank’s operation.

Interest expense, provision (recovery) for credit losses and salaries and benefits provide the significant expenses in the community bank’s operation.

The results of operations for the Company’s single reporting segment are shown within the Consolidated Statements of Income and Consolidated Balance Sheets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Carter Bankshares, Inc., its operations, and its present business environment, and its consolidated results of operations and financial condition and highlights material changes in its financial condition and results of operations as of and for the three and six month periods ended June 30, 2025 and June 30, 2024.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Carter Bankshares, Inc., its operations, and its present business environment, and its consolidated results of operations and financial condition and highlights material changes in its financial condition and results of operations as of and for the three and nine month periods ended September 30, 2025 and September 30, 2024.

The MD&A is provided as a supplement to, and should be read in conjunction with, The Company’s Consolidated Financial Statements and the accompanying notes thereto contained in Item 1 of this Quarterly Report on Form 10-Q.

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Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect.

Actual results may differ significantly from those expressed in or implied by these forward-looking statements.

The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements including, but not limited to the effects of:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

• general economic or business conditions, including unemployment levels, supply chain disruptions and slowdowns in economic growth;

• general economic or business conditions, including unemployment levels, supply chain disruptions, slowdowns in economic growth and government shutdowns;

• significant weakening of the local economies in which we operate;

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Explanation of Use of Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with generally accepted accounting principles in the United States (“GAAP”), management uses, and this quarterly report contains or references, interest and dividend income, yield on interest earning assets, net interest income and net interest margin on a fully taxable equivalent, (“FTE”) basis, which are non-GAAP financial measures.

Management believes these measures provide information useful to investors in understanding the Company’s underlying business, operational performance and performance trends as these measures facilitate comparisons with the performance of other companies in the financial services industry.

In addition to the results of operations presented in accordance with generally accepted accounting principles in the United States (“GAAP”), our management uses, and this quarterly report contains or references, interest and dividend income, yield on interest earning assets, net interest income and net interest margin on a fully taxable equivalent, (“FTE”) basis, which are non-GAAP financial measures.

This quarterly report and the accompanying tables discuss financial measures that we believe are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results from period-to-period in a meaningful manner.

Management also believes these measures provide information useful to investors in understanding the Company’s underlying business, operational performance and performance trends as these measures facilitate comparisons with the performance of other companies in the financial services industry.

The Company believes the presentation of interest and dividend income, yield on interest earning assets, net interest income and net interest margin on an FTE basis ensures the comparability of interest and dividend income, yield on interest earning assets, net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice.

Interest and dividend income (GAAP) per the Consolidated Statements of Income is reconciled to interest and dividend income adjusted on an FTE basis, yield on interest earning assets (GAAP) is reconciled to yield on interest earning assets adjusted on an FTE basis, net interest income (GAAP) is reconciled to net interest income adjusted on an FTE basis and net interest margin (GAAP) is reconciled to net interest margin adjusted on an FTE basis in the "Results of Operations and Financial Condition - Net Interest Income" section of this MD&A.

Although management believes that these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP or considered to be more relevant than financial results determined in accordance with GAAP, nor are they necessarily comparable with similar non-GAAP measures which may be presented by other companies.

Investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.

Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

Although management believes that these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered as an alternative to GAAP or considered to be more relevant than financial results determined in accordance with GAAP, nor are they necessarily comparable with similar non-GAAP measures that may be presented by other companies.

Investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

condition of the Company.

Critical Accounting Estimates

The Company’s critical accounting estimates involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of June 30, 2025 have remained unchanged from the disclosures presented under the heading “Critical Accounting Estimates” in its Annual Report on Form 10-K for the year ended December 31, 2024 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are incorporated herein by reference.

The Company’s critical accounting estimates involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2025 have remained unchanged from the disclosures presented under the heading “Critical Accounting Estimates” in its Annual Report on Form 10-K for the year ended December 31, 2024 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are incorporated herein by reference.

Overview and Strategy

Carter Bankshares, Inc.

(the “Company”) is a bank holding company headquartered in Martinsville, Virginia with assets of $4.8 billion at June 30, 2025.

(the “Company”) is a financial holding company, as of October 27, 2025, headquartered in Martinsville, Virginia with assets of $4.8 billion at September 30, 2025.

The Company is the parent company of its wholly owned subsidiary, Carter Bank & Trust (the “Bank”).

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As part of executing this strategy, the Company continues to dedicate significant resources to the resolution of the Company’s nonaccrual loans, the significant majority of which are related to a single large credit relationship that the Company placed on nonaccrual status in the second quarter of 2023, in a manner that best protects the Company, the Bank and shareholders.

The Company’s financial results continue to be significantly impacted by the single large credit relationship that the Company placed on nonaccrual status during the second quarter of 2023, which has an aggregate principal balance of $235.5 million as of June 30, 2025.

Since placement of these loans, now reduced to judgements, on nonaccrual status during the second quarter of

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

2023, interest income has been negatively impacted by $6.7 million and $9.1 million during the three months ended June 30, 2025 and 2024, respectively, and by $13.5 million and $18.4 million during the six months ended June 30, 2025 and 2024, respectively, or by $78.6 million in the aggregate.

Since placement of these loans, now reduced to judgments, on nonaccrual status during the second quarter of 2023, interest income has been negatively impacted by $6.5 million and $8.8 million during the three months ended September 30, 2025 and 2024, respectively, and by $20.0 million and $27.2 million during the nine months ended September 30, 2025 and 2024, respectively, or by $85.2 million in the aggregate.

Results of Operations and Financial Condition

Earnings Summary

Highlights for the Three Months Ended June 30, 2025

• Net interest income increased $4.3 million, or 15.2%, to $32.4 million for the three months ended June 30, 2025 compared to $28.1 million for the same period in 2024;

• The (recovery) provision for credit losses was a recovery of $2.3 million for the three months ended June 30, 2025, compared to a provision for credit losses of $0.5 million during the same period in 2024;

• Total noninterest income decreased $0.6 million to $4.9 million for the three months ended June 30, 2025 compared to the same period in 2024;

• Total noninterest expense increased $1.9 million to $29.3 million for the three months ended June 30, 2025 compared to the same period in 2024;

• Provision for income taxes increased $1.0 million to $2.1 million for the three months ended June 30, 2025 compared to the same period in 2024.

Highlights for the Six Months Ended June 30, 2025

◦ Net interest income increased $6.0 million, or 10.6%, to $62.5 million for the six months ended June 30, 2025 compared to $56.5 million for the same period in 2024;

◦ The (recovery) provision for credit losses was a recovery of $4.4 million for the six months ended June 30, 2025, compared to a provision for credit losses of $0.5 million for the the same period in 2024;

◦ Total noninterest income increased $1.2 million to $11.8 million for the six months ended June 30, 2025 compared to the same period in 2024;

◦ Total noninterest expense increased $3.6 million to $57.3 million for the six months ended June 30, 2025 compared to the same period in 2024;

◦ Provision for income taxes increased $1.8 million to $4.3 million for the six months ended June 30, 2025 compared to the same period in 2024.

Balance Sheet Highlights (period-end balances, June 30, 2025 compared to December 31, 2024 )

Highlights for the Three Months Ended September 30, 2025

• Net interest income increased $4.9 million, or 17.1%, to $33.7 million for the three months ended September 30, 2025 compared to $28.8 million for the same period in 2024;

• The provision (recovery) for credit losses was an expense of $2.9 million for the three months ended September 30, 2025, compared to a recovery for credit losses of $(0.4) million during the same period in 2024;

• Total noninterest income decreased $0.1 million to $5.4 million for the three months ended September 30, 2025 compared to the same period in 2024;

• Total noninterest expense increased $1.3 million to $28.7 million for the three months ended September 30, 2025 compared to the same period in 2024;

• Provision for income taxes increased $0.3 million to $1.7 million for the three months ended September 30, 2025 compared to the same period in 2024.

Highlights for the Nine Months Ended September 30, 2025

◦ Net interest income increased $10.9 million, or 12.8%, to $96.2 million for the nine months ended September 30, 2025 compared to $85.3 million for the same period in 2024;

◦ The provision (recovery) for credit losses was a recovery of $(1.5) million for the nine months ended September 30, 2025, compared to a provision for credit losses of $0.1 million for the same period in 2024;

◦ Total noninterest income increased $1.2 million to $17.2 million for the nine months ended September 30, 2025 compared to the same period in 2024;

◦ Total noninterest expense increased $4.9 million to $86.1 million for the nine months ended September 30, 2025 compared to the same period in 2024;

◦ Provision for income taxes increased $2.1 million to $6.0 million for the nine months ended September 30, 2025 compared to the same period in 2024.

Balance Sheet Highlights (period-end balances, September 30, 2025 compared to December 31, 2024 )

• The available-for-sale securities portfolio increased $9.5 million and is currently 15.0% of total assets compared to 15.4% of total assets;

• Total portfolio loans increased $122.3 million, or 6.8%, on an annualized basis, due to loan growth during the six months ended June 30, 2025;

• Total portfolio loans increased $210.8 million, or 7.8%, on an annualized basis, due to loan growth during the nine months ended September 30, 2025;

• The portfolio loans to deposit ratio was 91.1%, compared to 87.3%;

• At June 30, 2025, nonperforming loans decreased by $8.8 million to $250.6 million compared to December 31, 2024.

• At September 30, 2025, nonperforming loans decreased by $0.7 million to $258.6 million compared to December 31, 2024.

Nonperforming loans as a percentage of total portfolio loans were 6.74% compared to 7.15%;

• The Allowance for Credit Losses, (“ACL”) to total portfolio loans ratio was 1.90% compared to 2.09%.

The ACL on portfolio loans totaled $71.0 million at June 30, 2025, compared to $75.6 million at December 31, 2024;

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

• Total deposits increased $68.8 million, or 3.3%, on an annualized basis, to $4.2 billion at June 30, 2025, compared to December 31, 2024;

• FHLB borrowings increased $43.5 million to $113.5 million at June 30, 2025 compared to $70.0 million at December 31, 2024.

The Company reported net income of $8.5 million , or $0.37 diluted earnings per share, and $17.5 million , or $0.76 diluted earnings per share for the three and six months ended June 30, 2025, respectively, compared to net income of $4.8 million , or $0.21 diluted earnings per share, and $10.6 million , or $0.46 diluted earnings per share, for the three and six months ended June 30, 2024, respectively .

Three Months Ended June 30, Six Months Ended June 30,

• The Allowance for Credit Losses, (“ACL”) to total portfolio loans ratio was 1.92% compared to 2.09%.

The ACL on portfolio loans totaled $73.8 million at September 30, 2025, compared to $75.6 million at December 31, 2024;

• Total deposits increased $56.9 million, or 1.8%, on an annualized basis, to $4.2 billion at September 30, 2025, compared to December 31, 2024;

• FHLB borrowings increased $105.5 million to $175.5 million at September 30, 2025 compared to $70.0 million at December 31, 2024.

The Company reported net income of $5.4 million , or $0.24 diluted earnings per share, and $22.9 million , or $1.00 diluted earnings per share for the three and nine months ended September 30, 2025, respectively, compared to net income of $5.6 million , or $0.24 diluted earnings per share, and $16.2 million , or $0.70 diluted earnings per share, for the three and nine months ended September 30, 2024, respectively .

Three Months Ended September 30, Nine Months Ended September 30,

PERFORMANCE RATIOS 2025 2024 2025 2024

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The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee (“ALCO”), in order to mitigate interest rate and liquidity risks of the balance sheet.

A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what the Company believes is an acceptable level of net interest income.

A variety of ALCO strategies are implemented, within prescribed ALCO risk parameters, to produce what the Company believes is an acceptable level of net interest income.

Net interest income and the net interest margin are presented on an FTE basis.

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The following table reconciles interest and dividend income (GAAP), yield on interest-earning assets (GAAP), net interest margin (GAAP) and net interest income (GAAP) per the Consolidated Statements of Income to interest and dividend income on an FTE basis (non-GAAP), yield on interest-earning assets on an FTE basis (non-GAAP), net interest margin on an FTE basis (non-GAAP) and net interest income on an FTE basis (non-GAAP), respectively, for the periods presented:

(Dollars in Thousands) Three Months Ended June 30, Six Months Ended June 30,

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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The following table provides information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the periods presented:

(Dollars in Thousands) Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

(Dollars in Thousands) Three Months Ended September 30, 2025 Three Months Ended September 30, 2024

Balance Income/

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FHLB Borrowings 119,870 1,284 4.25 % 171,424 2,143 4.97 %

Federal Funds Purchased — — — % — — — %

Other Borrowings 11,145 142 5.05 % 10,070 136 5.37 %

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

(Dollars in Thousands) Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

(Dollars in Thousands) Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024

Balance Income/

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FHLB Borrowings 99,668 3,172 4.26 % 273,413 10,637 5.20 %

Federal Funds Purchased — — — % — — — %

Other Borrowings 10,761 429 5.33 % 8,749 323 4.93 %

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2 Tax-exempt income is on an FTE basis using the statutory federal corporate income tax rate of 21 percent.

Net interest income (GAAP) increased $4.3 million, or 15.2% and $6.0 million, or 10.6% for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Net interest income, on an FTE basis (non-GAAP), increased $4.2 million, or 15.0%, and $5.9 million, or 10.4% for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Net interest margin (GAAP) increased 25 basis points and 18 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024.

Net interest margin, on an FTE basis (non-GAAP), also increased 26 basis points and 18 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024.

The increases resulted from higher yields on average earning assets of four and six basis points and funding costs that declined 30 and 20 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024.

During the six months ended June 30, 2025, $1.3 billion of CDs matured and repriced from an average rate of 4.29% to an average rate of 3.47%.

Interest and dividend income (GAAP) increased $3.2 million and $5.1 million for the three and six months ended June 30, 2025 compared to the same periods in 2024.

Interest and dividend income, on an FTE basis (non-GAAP), increased $3.1 million and $5.1 million for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024, primarily resulting from average loan growth of $202.2 million and $172.1 million for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Average interest-earning assets increased primarily due to growth in average loans and increases of $26.9 million and $35.1 million in average interest-bearing deposits with banks during the three and six months ended June 30, 2025, respectively, partially offset by decreases of $23.4 million and $34.6 million in average investment securities and decreases of $8.2 million and $11.0 million in average FHLB stock for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Net interest income (GAAP) increased $4.9 million, or 17.1% and $10.9 million, or 12.8% for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Net interest income, on an FTE basis (non-GAAP), increased $4.9 million, or 16.9%, and $10.8 million, or 12.6% for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Net interest margin (GAAP) increased 28 basis points and 21 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Net interest margin, on an FTE basis (non-GAAP), also increased 28 basis points and 21 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

The increases were driven by a five basis point decrease in the yields on average earning assets during the three month period, a three basis point increase in yields on average earnings assets for the nine month period, and declines in funding costs of 45 and 28 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

For the three and nine months ended September 30, 2025, lower interest-bearing funding costs were positively impacted by the Federal Reserve’s reduction of short-term interest rates by 25 basis points during the third quarter of 2025, as well as by cumulative reductions of 100 basis points implemented between September 2024 to December 2024.

During the nine months ended September 30, 2025, $1.4 billion of CDs matured and repriced from an average rate of 4.22% to an average rate of 3.50%.

Interest and dividend income (GAAP) increased $2.6 million and $7.7 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Interest and dividend income, on an FTE basis (non-GAAP), increased $2.5 million and $7.6 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily resulting from average loan growth of $228.8 million and $191.2 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Average interest-earning assets increased primarily due to growth in average loans and increases of $20.6 million and $30.2 million in average interest-bearing

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

deposits with banks during the three and nine months ended September 30, 2025, respectively, partially offset by decreases of $13.9 million and $27.6 million in average investment securities and decreases of $2.3 million and $8.1 million in average FHLB stock for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

The change in average investment securities and average loans is the result of active balance sheet management to deploy the proceeds from securities maturities and principal curtailments into higher yielding loans, rather than reinvesting those proceeds back into the securities portfolio.

The portfolio has been diversified as to bond types, maturities, and interest rate structures.

As of June 30, 2025, the securities portfolio was comprised of 41.8% variable rate securities with approximately 89.4% that will reprice at least once over the next 12 months.

We believe having a balanced mix of variable and fixed rate securities is an important strategy, especially during times of rising interest rates because fixed-rate bond prices generally fall when interest rates increase, which can result in unrealized losses.

However, variable rate securities do not carry as much interest rate risk as fixed rate securities, so there is much less price volatility.

This variable rate strategy has limited the impact of past upward shifts in the yield curve on the Company’s unrealized losses on debt securities.

If the Federal Reserve continues reducing short-term interest rates, the Bank may consider changes to this interest rate mix strategy going forward.

Interest expense decreased $1.1 million and $0.9 million for the three and six months ended June 30, 2025 compared to the same periods in 2024.

Average interest-bearing deposits increased $389.1 million and $418.2 million, of which $196.1 million was brokered deposits, for the three and six months ended June 30, 2025, respectively.

compared to the same periods in 2024.

Average borrowings decreased $172.1 million and $233.1 million for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024, primarily due to increased deposit balances.

Overall, the cost of interest-bearing liabilities decreased 30 and 20 basis points for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024.

Our balance sheet is currently exhibiting characteristics of a liability sensitive position due to the short-term nature of our deposit portfolio and FHLB borrowings.

As of September 30, 2025, the securities portfolio was comprised of 39.7% variable rate securities with approximately 90.4% that will reprice at least once over the next 12 months.

We believe having a balanced mix of floating and fixed rate securities is an important strategy during any economic cycle.

The two structures behave differently when interest rates change, therefore providing a hedge.

In times of rising interest rates, fixed rate bond market prices generally fall, which can result in unrealized losses, while floating rate bonds generally increase in yield and hold constant market prices.

In times of falling interest rates, fixed rate bond market prices generally increase, which can result in unrealized gains, while floating rate bonds generally decrease in yield and hold constant on market price.

The bank considers short- and intermediate-term interest rates, and the likelihood of directional change, to fine tune its weighting between the two structures.

Interest expense decreased $2.3 million and $3.2 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Average interest-bearing deposits increased $276.6 million and $370.7 million, of which $196.1 million was brokered deposits, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024.

Average borrowings decreased $50.5 million and $171.7 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily due to increased deposit balances.

Overall, the cost of interest-bearing liabilities decreased 45 and 28 basis points for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024.

Our balance sheet is currently exhibiting characteristics of a slightly liability sensitive position due to the short-term nature of our deposit portfolio and FHLB borrowings.

Specifically, 68.6% of our CD portfolio and 77.2% of our outstanding FHLB borrowings will mature and reprice over the next twelve months.

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The following table sets forth for the periods presented a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates:

Three Months Ended June 30, 2025

Compared to Three Months Ended June 30, 2024 Six Months Ended June 30, 2025

Compared to Six Months Ended June 30, 2024

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

(Dollars in Thousands) Volume 3

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3 Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

(Recovery) Provision for Credit Losses

The Company recognizes (recovery) provision for credit losses based on the difference between the existing balance of ACL reserves and the ACL reserve balance necessary to adequately absorb expected credit losses associated with the Company’s financial instruments.

Similarly, the Company recognizes (recovery) provision for unfunded commitments based on the difference between the existing balance of reserves for unfunded commitments and the reserve balance for unfunded commitments necessary to adequately absorb expected credit losses associated with those commitments.

(Recovery) provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan portfolio, after giving consideration to charge-offs and recoveries for the period.

Provision (Recovery) for Credit Losses

The Company recognizes provision (recovery) for credit losses based on the difference between the existing balance of ACL reserves and the ACL reserve balance necessary to adequately absorb expected credit losses associated with the Company’s financial instruments.

Similarly, the Company recognizes provision (recovery) for unfunded commitments based on the difference between the existing balance of reserves for unfunded commitments and the reserve balance for unfunded commitments necessary to adequately absorb expected credit losses associated with those commitments.

Provision (recovery) for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan portfolio, after giving consideration to charge-offs and recoveries for the period.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table presents information regarding the (recovery) provision for credit losses and net charge-offs for the periods presented:

(Dollars in Thousands) Three Months Ended June 30, Six Months Ended June 30,

The following table presents information regarding the provision (recovery) for credit losses and net charge-offs for the periods presented:

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 $ Change 2025 2024 $ Change

(Recovery) Provision for Credit Losses $ (2,330) $ 491 $ (2,821) $ (4,355) $ 507 $ (4,862)

Recovery for Unfunded Commitments (335) (236) (99) (449) (279) (170)

Total Recovery for Credit Losses on Loans (2,665) 255 (2,920) (4,804) 228 (5,032)

Provision (Recovery) for Credit Losses $ 2,896 $ (432) $ 3,328 $ (1,459) $ 75 $ (1,534)

Provision (Recovery) for Unfunded Commitments 335 191 144 (114) (88) (26)

Total Provision (Recovery) for Credit Losses on Loans 3,231 (241) 3,472 (1,573) (13) (1,560)

Provision for Securities — — — — — —

Total Recovery for Credit Losses $ (2,665) $ 255 $ (2,920) $ (4,804) $ 228 $ (5,032)

Total Provision (Recovery) for Credit Losses $ 3,231 $ (241) $ 3,472 $ (1,573) $ (13) $ (1,560)

Net Loan Charge-offs $ 157 $ 15,345 $ (15,188) $ 379 $ 16,218 $ (15,839)

Net Loan Charge-offs / Average Portfolio Loans 0.02 % 0.04 % 0.01 % 0.05 %

The (recovery) provision for credit losses was a recovery of 2.3 million and a recovery of 4.4 million for the three and six months ended June 30, 2025, respectively, compared to a provision for credit losses of $491 thousand and $507 thousand for the same periods in 2024, respectively.

The changes compared to the same periods in 2024 were primarily driven by a decline in the Other segment reserve rate, specifically the Company’s largest credit relationship, higher curtailment payments during the three and six months ended June 30, 2025 compared to the same periods in 2024, partially offset by loan growth during the three and six months ended June 30, 2025.

The recovery for unfunded commitments was a recovery of $335 thousand and a recovery of $449 thousand for the three and six months ended June 30, 2025, respectively, compared to recoveries of $236 thousand and $279 thousand for the same periods in 2024, respectively.

The changes compared to the same periods in 2024 were primarily due to decreased unfunded commitments in construction loans.

Net Loan Charge-offs (annualized) / Average Portfolio Loans 0.02 % 1.71 % 0.01 % 0.61 %

The provision (recovery) for credit losses was an expense of $2.9 million and a recovery of $(1.5) million for the three and nine months ended September 30, 2025, respectively, compared to a recovery for credit losses of $(432) thousand and an expense of $75 thousand for the same periods in 2024, respectively.

The changes compared to the same periods in 2024 were primarily driven by $3.8 million in general reserves established for higher new loan volume during the third quarter of 2025, along with the establishment of a $1.2 million specific reserve on an existing CRE relationship that has been in nonaccrual status since the first quarter of 2025 as a result of an updated appraisal.

The increases were partially offset by a reduction in the Other segment reserve, resulting from a lower reserve rate from 13.13% at September 30, 2024 to 9.49% at September 30, 2025, offset by lower curtailment payments during the three and nine months ended September 30, 2025 compared to the same periods in 2024.

The provision (recovery) for unfunded commitments was an expense of $335 thousand and a recovery of $(114) thousand for the three and nine months ended September 30, 2025, respectively, compared to an expense of $191 thousand and a recovery of $(88) thousand for the same periods in 2024, respectively.

The changes compared to the same periods in 2024 were primarily due to increased unfunded commitments in construction loans.

The reserve for unfunded commitments is largely comprised of unfunded commitments related to real estate construction loans and pressure on the reserve rates.

There are three basic factors that influence the reserve rates associated with unfunded commitments for real estate construction loans.

First, the reserve rate is extrapolated from the reserve rates calculated for certain commercial real estate funded loans within the ACL model.

These reserve rates are influenced by the same factors cited in the ACL model such as economic forecasts, average portfolio life, etc.

Refer to Note 1, Summary of Significant Accounting Policies, in Item 8.

Financial Statements and Supplementary Data for our ACL Policy, contained in our Annual Report on Form 10-K for the year ended December 31, 2024 .

Second, since the category of construction is generic, management applies a weighting of the reserve rates associated with certain CRE loans.

The proportion of these segments affect the weighting.

Third, volume changes impact the total reserve calculation.

See the “Allowance for Credit Losses” section of this MD&A for additional details regarding our charge-offs.

Noninterest Income

(Dollars in Thousands) Three Months Ended June 30, Six Months Ended June 30,

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

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Total Noninterest Income $ 5,370 $ 5,422 $ (52) (1.0) % $ 17,179 $ 16,000 $ 1,179 7.4 %

For the three months ended June 30, 2025 total noninterest income decreased $0.6 million, or 11.3% and, for the six months ended June 30, 2025, total noninterest income increased $1.2 million, or 11.6% compared to the same periods in 2024.

The most significant decreases compared to the three months ended June 30, 2024 were $0.3 million in other noninterest income and $0.2 million in insurance commissions due to lower activity during the three months ended June 30, 2025 .

The most significant increase during the six months ended June 30, 2025 was related to other noninterest income as a result of a $1.9 million gain on a bank owned life insurance (“BOLI”) death benefit recorded in the first quarter of 2025.

Partially o ffsetting the increase in other noninterest income compared to the six months ended June 30, 2024 was a decline of $0.5 million in insurance commissions due to lower activity in the six months ended June 30, 2025 .

Total noninterest income decreased slightly by $0.1 million for the three months ended September 30, 2025, but increased by $1.2 million, or 7.4%, for the nine months ended September 30, 2025, compared to the same periods in 2024.

Insurance commission income declined for both the three and nine month periods due to lower activity compared to the same periods in

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The most significant increase compared to the nine months ended September 30, 2024 was the $1.8 million increase in other noninterest income, primarily driven by a $1.9 million gain on a BOLI death benefit recorded in the first quarter of 2025.

Noninterest Expense

(Dollars in Thousands) Three Months Ended June 30, Six Months Ended June 30,

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

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Total Noninterest Expense $ 28,704 $ 27,433 $ 1,271 4.6 % $ 86,050 $ 81,136 $ 4,914 6.1 %

For the three and six months ended June 30, 2025, total noninterest expense increased $1.9 million and $3.6 million compared to the same periods in 2024.

During the three months ended June 30, 2025, other noninterest expenses increased $0.8 million, occupancy expenses increased $0.4 million and professional and legal fees increased $0.4 million.

The increase in other noninterest expense related to:

(1) losses on sales and write-downs of other real estate owned, net, due to a net loss of $0.3 million in the second quarter of 2025 which included $0.5 million in write-downs on OREO branches, partially offset by a $0.2 gain on the sale of an OREO branch property and (2) $0.3 million of 1035 exchange fees in the second quarter of 2025, as a direct result of the early surrender and transfer to new carriers of the Company’s BOLI policies.

Occupancy expense, net increased for the three months ended June 30, 2025 primarily due to additional software and maintenance expenses and higher depreciation expense.

For the three months ended June 30, 2025, professional and legal fees also increased $0.4 million due to costs related to the Branch Purchase that were expensed during the quarter.

During the six months ended June 30, 2025, other noninterest expenses increased $1.7 million, occupancy expenses increased $1.2 million, advertising expenses increased $0.7 million and data processing expenses increased $0.7 million, partially offset by decreases of $0.7 million in salaries and employee benefits and $0.4 million in FDIC insurance expense.

The primary increase in other noninterest expense was due to the above mentioned 1035 exchange fees, which increased $0.5 million year-to-date, as a result of the early surrender and transfer to new carriers of the Company’s BOLI policies.

As discussed above, the increase in occupancy expense, net, for the six months ended June 30, 2025 was primarily due to additional software and maintenance expenses and higher depreciation expense.

The increase in advertising expenses primarily related to contributions made during the first quarter of 2025, as well as additional expenses incurred during the six months of 2025 related to the launching of the new brand refresh that commenced in the fourth quarter of 2024.

The increase in data processing expenses relates primarily to general inflationary cost increases for existing and new service agreements in the beginning of the year.

The decreases in salaries and employee benefits primarily resulted from higher deferred compensation costs due to increased loan volume and the effects of a new cost study in the third quarter of 2024.

This decrease was partially offset by higher medical expenses, annual merit increases and higher incentive costs during the six months ended June 30, 2025.

The decrease in FDIC insurance expense was primarily due to the aforementioned curtailment payments which have reduced the outstanding balance of the aforementioned large nonperforming credit relationship from $301.9 million at June 30, 2024 to $235.5 million at June 30, 2025, which is a component used to determine the assessment.

For the three and nine months ended September 30, 2025, total noninterest expense increased $1.3 million and $4.9 million compared to the same periods in 2024.

The increase for the three months ended September 30, 2025 was primarily driven by higher professional and legal fees of $0.7 million, occupancy expenses, net, of $0.6 million, and other noninterest expenses of $0.5 million, partially offset by a $0.6 million decrease in salaries and employee benefits compared to the same period in 2024.

The increase in professional and legal fees was driven by costs associated with the Branch Purchase.

Additionally, occupancy expenses, net, increased due to higher software and maintenance costs, as well as increased depreciation expense related to the Branch Purchase.

The increase in other noninterest expense primarily related to activity on four other real estate owned (“OREO”) branch properties of $0.4 million.

While base salaries increased during the three months ended September 30, 2025, total salary expenses decreased due to higher salary cost deferrals associated with higher loan growth, which reduced the amount of salary expense recognized in the third quarter.

The increase in noninterest expense during the nine months ended September 30, 2025, compared to the same period in 2024 was primarily driven by the following increases:

other noninterest expenses of $2.1 million, occupancy expenses, net, of $1.8 million, advertising expenses of $0.8 million, professional and legal fees of $0.8 million, data processing expenses of $0.7 million, and debit card expenses of $0.5 million, partially offset by lower salaries and employee benefits of $1.3 million and FDIC insurance expenses of $0.5 million.

The increases in other noninterest expense was due primarily due to activity on four OREO branch properties, as previously discussed, and $0.5 million in 1035 exchange fees, as a result of the early surrender and transfer to new carriers of the Company’s BOLI policies, both of which were recorded in the second quarter of 2025.

As discussed above, the increase in occupancy expense, net, for the nine months ended September 30, 2025 was primarily due to additional software and maintenance expenses and higher depreciation expense.

The increase in advertising expenses primarily related to contributions made during the first quarter of 2025, as well as additional expenses incurred during the first nine months of 2025 related to the launching of the new brand refresh that commenced in the fourth quarter of 2024.

Similar to the variance above, the increase in professional and legal fees was driven by costs associated with the Branch Purchase, as well as various consulting expenses primarily due to project management.

The increase in data processing expenses related primarily to general inflationary cost increases for existing and new service agreements in the beginning of the year.

Debit card expenses increased during the period primarily due to higher credit card billing fees and elevated debit card fraud losses.

As discussed previously, while base salaries increased during the nine months ended September 30, 2025, total salary expenses decreased due to higher salary cost deferrals of $5.0 million associated with higher loan growth, which reduced the amount of salary expense recognized in the nine months ended September 30, 2025.

The decrease in FDIC insurance expense was primarily due to the curtailment payments which have reduced the outstanding balance of the aforementioned large nonperforming credit relationship from $301.9 million at September 30, 2024 to $228.6 million at September 30, 2025, which is a component used to determine the assessment.

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Provision for Income Taxes

The provision for income taxes increased $1.0 million and $1.8 million for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Pre-tax income increased $4.7 million and $8.6 million for the three and six months ended June 30, 2025 compared to the same periods in 2024.

The increase for the three and six months ended June 30, 2025 compared to the same periods in 2024 primarily related to an increase of $4.3 million and $6.0 million, respectively in net interest income, recording recoveries of $2.3 million and $4.4 million, respectively to the (recovery) provision for credit losses, as well as, a tax-exempt gain of $1.9 million for a BOLI death benefit recorded in first quarter of 2025.

The effective tax rate was 19.9% and 19.8% for the three and six months ended June 30, 2025 compared to 18.9% and 19.3% for the same periods in 2024.

The Company ordinarily generates an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest income, tax credit projects and bank owned life insurance (“BOLI”).

The provision for income taxes increased $0.3 million and $2.1 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Pre-tax income increased $0.1 million and $8.7 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

The effective tax rate was 24.3% and 20.9% for the three and nine months ended September 30, 2025 compared to 19.9% and 19.5% for the same periods in 2024.

The increase in the effective tax rate for the three and nine months ended September 30, 2025 compared to the same period in 2024 was primarily related to a $1.2 million taxable gain on a surrender of BOLI policies and a related $0.1 million Modified Endowment Contract (“MEC”) penalty.

Refer to Note 12, Provision for Income Taxes, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the surrender of BOLI policies and related MEC penalty.

The increase in the effective tax rate for the nine months ended September 30, 2025 compared to the same period in 2024 also included an increase in pre-tax income, which was largely driven by a $10.9 million increase net interest income and a $1.9 million tax-exempt gain for a BOLI death benefit, partially offset by a $4.9 million increase in noninterest expense.

The Company ordinarily generates an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest income, tax credit projects and BOLI.

Financial Condition

June 30, 2025

Total assets increased $124.9 million, to $4.8 billion at June 30, 2025 compared to December 31, 2024.

Total portfolio loans increased $122.3 million, or 6.8%, on an annualized basis, at June 30, 2025 compared to December 31, 2024, primarily due to growth in the commercial real estate (“CRE”) and residential mortgage portfolios, partially offset by the aforementioned curtailment payments in the Other segment.

The available-for-sale securities portfolio increased $36.8 million and is currently 15.8% of total assets at June 30, 2025 compared to 15.4% of total assets at December 31, 2024.

The increase is due to new security purchases during the first six months of 2025.

During the six months ended June 30, 2025, the Company initiated a 1035 exchange of $20.7 million in BOLI in order to transfer the proceeds to new insurance carriers and take advantage of enhanced credit ratings and better yields due to improving BOLI markets.

September 30, 2025

Total assets increased $180.9 million, to $4.8 billion at September 30, 2025 compared to December 31, 2024.

Total portfolio loans increased $210.8 million, or 7.8%, on an annualized basis, at September 30, 2025 compared to December 31, 2024, due to growth in the commercial real estate (“CRE”), residential mortgage, construction and other consumer portfolios, partially offset by the aforementioned curtailment payments in the Other segment and a decrease in the commercial and industrial loan (“C&I”) portfolio.

The available-for-sale securities portfolio increased $9.5 million and is currently 15.0% of total assets at September 30, 2025 compared to 15.4% of total assets at December 31, 2024.

The increase is due to new security purchases and the positive change in unrealized losses, partially offset by normal paydowns, amortizations and calls during the first nine months of 2025.

During the nine months ended September 30, 2025, the Company initiated a 1035 exchange of $20.7 million in BOLI in order to transfer the proceeds to new insurance carriers and take advantage of enhanced credit ratings and better yields due to improving BOLI markets.

The exchange was an opportunity to retire below market yielding BOLI assets and reinvest the proceeds from the exchange into higher yielding BOLI related assets on the balance sheet.

Total deposits increased $68.8 million to $4.2 billion at June 30, 2025 compared to December 31, 2024.

Total deposits increased $56.9 million to $4.2 billion at September 30, 2025 compared to December 31, 2024.

Total deposits included $55.9 million related to the Branch Purchase that the Company completed during the second quarter of 2025.

Deposits increased primarily due to growth in interest-bearing demand accounts and money market accounts, partially offset by decreases in CDs and savings accounts.

FHLB borrowings increased $43.5 million at June 30, 2025 compared to December 31, 2024.

The Company had no outstanding federal funds purchased at June 30, 2025 and December 31, 2024.

Deposits increased due to growth in interest-bearing demand accounts and money market accounts, partially offset by decreases in noninterest-bearing demand accounts, savings accounts and CDs.

FHLB borrowings increased $105.5 million at September 30, 2025 compared to December 31, 2024 due to loan growth.

The Company had no outstanding federal funds purchased at September 30, 2025 and December 31, 2024.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table presents the composition of available-for-sale securities at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024 $ Change

(Dollars in Thousands) September 30, 2025 December 31, 2024 $ Change

Government Agency Securities $ 21,100 $ 26,950 $ (5,850)

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Securities are subject to market risks that could negatively affect the level of liquidity available to us.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

purchases are subject to our investment policy that is approved annually by our Board and administered through ALCO and our treasury function.

The securities portfolio increased $36.8 million at June 30, 2025 compared to December 31, 2024, primarily due to purchases and changes in market values driven by fluctuations in intermediate treasury yields.

During the six months ended June 30, 2025, there were new security purchases totaling $53.3 million, partially offset by normal paydowns and maturities.

Securities comprise 15.8% of total assets at June 30, 2025 compared to 15.4% at December 31, 2024.

As of June 30, 2025, the securities portfolio was comprised of 41.8% variable rate securities with approximately 89.4% that will reprice at least once over the next 12 months.

At June 30, 2025, total gross unrealized gains in the available-for-sale portfolio were $0.3 million, offset by $67.0 million of gross unrealized losses.

Security purchases are subject to our investment policy that is approved annually by our Board and administered through ALCO and our treasury function.

The securities portfolio increased $9.5 million at September 30, 2025 compared to December 31, 2024, primarily due to purchases and changes in market values driven by fluctuations in intermediate treasury yields.

During the nine months ended September 30, 2025, there were new security purchases totaling $58.6 million and a positive change in unrealized losses of $23.6 million, partially offset by normal paydowns, amortization and calls of $72.7 million during the first nine months of 2025.

Securities comprised 15.0% of total assets at September 30, 2025 compared to 15.4% at December 31, 2024.

As of September 30, 2025, the securities portfolio was comprised of 39.7% variable rate securities with approximately 90.4% that will reprice at least once over the next 12 months.

At September 30, 2025, total gross unrealized gains in the available-for-sale portfolio were $0.4 million, offset by $59.1 million of gross unrealized losses.

At December 31, 2024, total gross unrealized gains in the available-for-sale portfolio were $0.1 million, offset by $82.4 million of gross unrealized losses.

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The Company’s investment securities with intermediate and long-term maturities were the largest driver of these gross unrealized losses, as the market values of these securities are significantly impacted by the Treasury yield curve for similar durations (i.e., 5- and 10-year Treasury securities).

This portion of the Treasury yield curve has moved lower over the past three months, driving unrealized losses on outstanding securities lower.

This portion of the Treasury yield curve has moved lower over the past nine months, driving unrealized losses on outstanding securities lower.

Changes in short-term interest rates can affect the yield on floating rate securities.

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The Company expects that market values on the Bank’s intermediate and long-term maturity holdings will continue to fluctuate in large part driven by treasury yield changes.

At June 30, 2025 the 5-year and 10-year U.S.

At September 30, 2025 the 5-year and 10-year U.S.

Treasury yields were 3.74% and 4.16%, respectively.

At December 31, 2024, those same bond yields were 4.38% and 4.58%, respectively.

Therefore, these decreases of 59 bps and 34 bps, respectively in the intermediate part of the yield curve largely caused the reduction in unrealized losses for the six months of 2025.

The effects were generally greater for longer maturity bonds, such as municipal bonds.

On the other hand, floating rate bonds largely held consistent values, as those interest rates adjust in line with Federal Reserve interest rate changes.

At June 30, 2025 and December 31, 2024, the Company had no credit related impairment.

The Basel rules permit most banking organizations to retain, through a one-time election, existing treatment for accumulated other comprehensive loss, which currently does not affect regulatory capital.

The Company elected to retain this treatment which reduces the volatility of regulatory capital levels.

Therefore, these decreases of 64 basis points and 42 basis points, respectively in the intermediate part of the yield curve largely caused the reduction in unrealized losses for the first nine

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

months of 2025.

The effects were generally greater for longer maturity bonds, such as municipal bonds.

Conversely, floating rate bonds largely held consistent values, as those interest rates adjust in line with Federal Reserve interest rate changes.

At September 30, 2025 and December 31, 2024, the Company had no credit related impairment.

The Company elected to retain this treatment which reduces the volatility of regulatory capital levels.

Loan Composition

The following table summarizes our loan portfolio at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

Commercial Real Estate $ 2,063,181 $ 1,869,831

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For a discussion of the risk factors relevant to our business and operations, please refer to Part I, Item 1A, “Risk Factors,” contained in our Annual Report on Form 10-K for the year ended December 31, 2024 .

Total portfolio loans increased $122.3 million, or 6.8% on an annualized basis, at June 30, 2025 compared to December 31, 2024 with production primarily in our CRE and residential mortgage loan portfolios, partially offset by a decline in the Other segment due to $16.4 million curtailment payments made during the first half of 2025.

Total portfolio loans increased $210.8 million, or 7.8% on an annualized basis, at September 30, 2025 compared to December 31, 2024 with production due to growth in the CRE, residential mortgage, construction and other consumer portfolios, partially offset by declines in the Other segment due to $23.4 million curtailment payments made during the nine months ended September 30, 2025 and a decline in the C&I portfolio.

The CRE portfolio is monitored for potential concentrations of credit risk by market, property type and tenant concentrations.

At June 30, 2025, the loan portfolio was comprised of 25.3% floating rates which reprice monthly, 38.4% variable rates that reprice at least once during the life of the loan and the remaining 36.3% are fixed rate loans.

At September 30, 2025, the loan portfolio was comprised of 24.2% floating rates which reprice monthly, 38.1% variable rates that reprice at least once during the life of the loan and the remaining 37.7% are fixed rate loans.

The Company continues to carefully monitor the loan portfolio during 2025, including in light of market conditions that impact our borrowers and the interest rate environment.

Total CRE represented 53.4% of total portfolio loans at June 30, 2025 compared to 51.6% at December 31, 2024.

Total CRE represented 53.8% of total portfolio loans at September 30, 2025 compared to 51.6% at December 31, 2024.

The collateral for the Company’s CRE loans are geographically concentrated predominantly in North Carolina, Virginia, South Carolina, West Virginia and Georgia and within the retail/restaurant, warehouse, hospitality, multifamily, and office industries.

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The following table presents the Company's CRE loan portfolio breakout by collateral type, loan amounts for each collateral type included in special mention and substandard and the related percentages by segment to the collateral types at the dates presented:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgage Construction Other Total CRE Collateral Type in Special Mention and Substandard Risk Rating % of Each Segment to Total CRE Collateral Type

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CRE loans represent a portfolio concentration risk.

The majority of our CRE loans are made in the above noted geographies and granted to experienced developers and sponsors with loan guaranty structures that provide recourse to individuals with access to financial resources.

The majority of our CRE loans are made in the above noted geographies and granted to experienced developers and sponsors generally with loan guaranty structures that provide recourse to individuals with access to financial resources.

We believe our knowledge of CRE and our operating knowledge at the local and regional levels of these markets allows us to effectively manage concentration risk.

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Although leverage is important, the Company also focuses on cash flow generation and employs stress testing to calculate a supportable loan amount.

Aggregate commitments to our top 10 credit relationships were $683.9 million, or 18.2% of gross loans, at June 30, 2025, compared to $685.9 million, or 18.9% of gross loans, at December 31, 2024.

The Other segment represents 34.4% of the top 10 credit relationships and the Company transferred its largest credit relationship with a current balance of $235.5 million as of June 30, 2025 to nonaccrual during the second quarter of 2023, as described in more detail below under “Credit Quality” in this MD&A.

Aggregate commitments to our top 10 credit relationships were $684.0 million, or 17.8% of gross loans, at September 30, 2025, compared to $685.9 million, or 18.9% of gross loans, at December 31, 2024.

The Other segment represents 33.4% of the top 10 credit relationships and the Company transferred its largest credit relationship with a current balance of $228.6 million as of September 30, 2025 to nonaccrual during the second quarter of 2023, as described in more detail below under “Credit Quality” in this MD&A.

The following table summarizes our top 10 relationships and a description of industries represented at the dates presented:

For the Periods Ending

Dollars in Thousands June 30, 2025 December 31, 2024 Change June 30, 2025 % of Gross Loans June 30, 2025 % of RBC

Dollars in Thousands September 30, 2025 December 31, 2024 Change September 30, 2025 % of Gross Loans September 30, 2025 % of RBC

Hospitality, Agriculture & Energy $ 228,554 $ 251,982 $ (23,428) 5.96 % 44.77 %

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Office & Retail 55,206 40,462 14,744 1.44 % 10.81 %

Multifamily 51,984 51,990 (6) 1.39 % 10.23 %

Retail & Office 55,186 52,913 2,273 1.44 % 10.81 %

Multifamily 54,817 51,990 2,827 1.43 % 10.74 %

Warehouse 48,415 49,661 (1,246) 1.26 % 9.48 %

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Concentration (25% of Risk Based Capital ("RBC")) $ 127,639 $ 125,190

Unfunded commitments on lines of credit were $565.3 million at June 30, 2025 as compared to $620.8 million at December 31, 2024.

Unfunded commitments on lines of credit were $655.9 million at September 30, 2025 as compared to $620.8 million at December 31, 2024.

The majority of unused commitments are for construction projects that will be drawn as the construction progresses toward completion.

Total utilization was 57.0% at June 30, 2025 and 53.8% at December 31, 2024.

Unfunded commitments on commercial operating lines of credit was 57.8% at June 30, 2025 and 53.8% at December 31, 2024.

Total utilization was 53.2% at September 30, 2025 and 53.8% at December 31, 2024.

Unfunded commitments on commercial operating lines of credit was 53.1% at September 30, 2025 and 53.8% at December 31, 2024.

Unsecured loans pose higher risk for the Company due to the lack of a well-defined secondary source of repayment.

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The Company significantly increased the standards for consumer unsecured lending by adjusting upward the required qualifying Fair Isaac Corporation (“FICO”) scores and restricting loan amounts at lower FICO scores, which resulted in a significant decline in the loss rate.

Deferred costs and fees included in the portfolio balances above were $12.0 million and $8.8 million at June 30, 2025 and December 31, 2024, respectively.

Discounts on purchased 1-4 family loans included in the portfolio balances above were $91.5 thousand and $104.1 thousand at June 30, 2025 and December 31, 2024, respectively.

Deferred costs, net of fees included in the portfolio balances above were $13.4 million and $8.8 million at September 30, 2025 and December 31, 2024, respectively.

Refer to Note 4, Loans and Loans Held-for-Sale, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to our loans.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Credit Quality

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These loans typically represent the highest risk of loss to the Company.

Action plans are established and these loans are monitored through regular contact with the borrower and loan officer, review of current financial information and other documentation, review of all loan or potential loan restructures or modifications and the regular re-evaluation of assets held as collateral.

On a quarterly basis, the Credit Risk Committee of the Board meets to review our loan portfolio metrics, approve segment limits, approve the adequacy of ACL, and review the findings from Loan Review identified in the previous quarter.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

are established and these loans are monitored through regular contact with the borrower and loan officer, review of current financial information and other documentation, review of all loan or potential loan restructures or modifications and the regular re-evaluation of assets held as collateral.

On a quarterly basis, the Credit Risk Committee of the Board meets to review our loan portfolio metrics, approve segment limits, approve the adequacy of the ACL, and review the findings from Loan Review identified in the previous quarter.

Annually, this same committee approves credit related policy changes and policy enhancements as they become available.

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Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful, or generally when interest or principal payments are 90 days or more past due based on contractual terms.

Consumer unsecured loans and secured loans are evaluated for charge-off after the loan becomes 90 days past due.

Consumer unsecured loans and secured loans are evaluated for charge-offs after the loan becomes 90 days past due.

Loans past due 90 days are automatically transferred to nonaccrual status.

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The following table summarizes nonperforming assets at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024 Change

(Dollars in Thousands) September 30, 2025 December 31, 2024 Change

Nonaccrual Loans

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Total Nonperforming Assets $ 258,967 $ 260,008 $ (1,041)

Nonperforming assets decreased $7.8 million to $252.2 million at June 30, 2025 compared to December 31, 2024.

The decrease of $8.8 million in nonperforming loans was primarily related to $16.4 million of curtailment payments made by the Bank’s largest nonperforming credit relationship, partially offset by the transfer of a $9.5 million CRE relationship, consisting of four loans, to NPL status during the first quarter of 2025.

Nonperforming assets decreased $1.0 million to $259.0 million at September 30, 2025 compared to December 31, 2024.

The $0.7 million reduction in nonperforming loans was primarily due to $23.4 million in curtailment payments made by the Bank’s largest nonperforming credit relationship.

This decrease was partially offset by the transfer of $24.1 million on two CRE relationships, consisting of five loans, to nonperforming loan (“NPL”) status.

One loan totaling $14.6 million was transferred during the third quarter of 2025, and the remaining four loans totaling $9.5 million were transferred during the first quarter of 2025.

During the three months ended September 30, 2025 a $14.6 million CRE loan in the office sector located in northern Virginia was placed on nonaccrual status and classified as substandard.

This CRE loan is secured by an office building whose government agency tenants are vacating during the fourth quarter of 2025.

Although this CRE loan was originated at a

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

relatively low loan-to-value ratio, the Bank is closely reviewing this CRE loan, and other similar loans in its CRE portfolio, for changes in valuation and other market impacts.

Also placed in nonaccrual status during the three months ended September 30, 2025 was a $0.8 million residential mortgage loan.

During the first quarter of 2025, the Company placed a $9.5 million CRE relationship consisting of four loans on nonaccrual status.

These loans are secured by warehouse facilities located in North Carolina.

The properties are currently in receivership and are being marketed for sale.

Two are currently under contract, and the sales are expected to close in the fourth quarter of 2025.

During the third quarter of 2025, a specific reserve of $1.2 million was established based on updated appraisals on one loan in the relationship.

During the second quarter of 2023, the Company placed $301.9 million of commercial loans that reside in the Other segment of the Company’s loan portfolio, relating to the Bank’s largest credit relationship, on nonaccrual status due to loan maturities and failure to pay in full.

These loans with a current outstanding principal balance of $235.5 million at June 30, 2025, remained on nonaccrual status at June 30, 2025 and December 31, 2024.

These nonperforming loans are 94.0% of the Company's total nonperforming loans and 93.4% of the Company's total nonperforming assets at June 30, 2025.

During 2024 and the six months ended June 30, 2025, $66.4 million of curtailment payments made by the various entities in which James C.

Justice, II has an interest to the Bank decreased the aggregate nonperforming loan balance outstanding to the Bank from $301.9 million as of June 30, 2023 to $235.5 million as of June 30, 2025.

These loans with a current outstanding principal balance of $228.6 million at September 30, 2025, remained on nonaccrual status at September 30, 2025 and December 31, 2024.

These nonperforming loans are 88.4% of the Company's total nonperforming loans and 88.3% of the Company's total nonperforming assets at September 30, 2025.

During 2024 and the nine months ended September 30, 2025, $73.4 million of curtailment payments made by the various entities in which James C.

Justice, II has an interest to the Bank decreased the aggregate nonperforming loan balance outstanding to the Bank from $301.9 million as of June 30, 2023 to $228.6 million as of September 30, 2025.

The Company believes it is well secured based on the net carrying value of the credit relationship and it has appropriately reserved for expected credit losses with respect to all such loans based on information currently available.

However, the Company cannot give any assurance as to the timing or amount of future payments or collections on such loans, the timing of any credit credit administration or collection efforts, or that the Company will ultimately collect all amounts contractually due.

However, the Company cannot give any assurance as to the timing or amount of future payments or collections on such loans, the timing of any credit administration or collection efforts, or that the Company will ultimately collect all amounts contractually due.

The Company is closely monitoring all developments that may impact collateral values or potential recoveries on its nonperforming loans, including claims that may be asserted by other purported creditors.

Based on analyses of the credit relationship and various discounted cash flow valuation techniques utilized in the alternative modeling, which resulted in specific reserves with respect to these loans of $24.0 million at June 30, 2025, or 10.2% of these loans aggregate principal amount as compared to $30.3 million or 12.0% of these loans aggregate principal amount at December 31, 2024.

Based on analyses of the credit relationship and various discounted cash flow valuation techniques utilized in the alternative modeling, which resulted in specific reserves with respect to these loans of $21.7 million at September 30, 2025, or 9.5% of these loans aggregate principal amount as compared to $30.3 million or 12.0% of these loans aggregate principal amount at December 31, 2024.

This decline was driven by the aforementioned curtailments, updated analysis of the credit relationship during the second quarter of 2025 using the discounted cash flow model with updated assumptions and inputs regarding the credit relationship, legal risk and related risks.

As the borrowers on these loans operate in the hospitality, agriculture, and energy sectors, this credit relationship is secured by, among other collateral, commercial real estate properties in these sectors including but not limited to top-tier hospitality properties.

The following is an analysis of nonperforming loans by loan portfolio segment at the dates presented, and each segment’s relative contribution to total nonperforming loans:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(Dollars in Thousands) Amount % of NPLs Amount % of NPLs

6 unchanged sentences

Balance End of Period $ 258,637 100.0 % $ 259,349 100.0 %

Closed retail bank offices had a book value of $1.7 million at June 30, 2025 and $0.7 million at December 31, 2024, and are recorded in OREO on the Consolidated Balance Sheets.

During the six months ended June 30, 2025, the Bank transferred three closed branches to OREO, which was partially offset by the sale of one of these closed branches in the second quarter of 2025.

Closed retail bank offices had a book value of $0.3 million at September 30, 2025 and $0.7 million at December 31, 2024, and are recorded in OREO on the Consolidated Balance Sheets.

During the nine months ended September 30, 2025, the Bank transferred three closed branches to OREO, which was partially offset by the sale of one of these closed branches in the second quarter of 2025 and the sale of the additional two closed branches in the third quarter of 2025.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Past Company legacy underwriting standards relied heavily on loan to value and did not necessarily consider the income characteristics of the borrower or the repayment capacity of collateral with respect to speculative, and land financing.

3 unchanged sentences

Closed-end installment loans, amortizing loans secured by real estate and any other loans with payments scheduled monthly are reported past due when the borrower is in arrears two or more monthly payments.

Other multi-payment obligations with

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

payments scheduled other than monthly are reported past due when one scheduled payment is due and unpaid for 30 days or more.

Other multi-payment obligations with payments scheduled other than monthly are reported past due when one scheduled payment is due and unpaid for 30 days or more.

We monitor delinquency on a monthly basis, including loans that are at risk for becoming delinquent and early stage delinquencies in order to identify emerging patterns and potential problem loans.

1 unchanged sentence

The following is the allocation of the ACL balance by segment at the dates presented:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(Dollars in Thousands) Amount % of Loans in each Category to Total Portfolio Loans Amount % of Loans in each Category to Total Portfolio Loans

6 unchanged sentences

Balance End of Period $ 73,762 100.0 % $ 75,600 100.0 %

The ACL was $71.0 million, or 1.90%, of total portfolio loans at June 30, 2025 compared to $75.6 million, or 2.09%, of total portfolio loans at December 31, 2024.

The ACL was $73.8 million, or 1.92%, of total portfolio loans at September 30, 2025 compared to $75.6 million, or 2.09%, of total portfolio loans at December 31, 2024.

The following table summarizes the credit quality ratios and their components at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

Allowance for Credit Losses to Total Portfolio Loans

14 unchanged sentences

Net Charge-offs to Average Portfolio Loans 0.01 % 0.46 %

The (recovery) provision for credit losses, which includes a (recovery) provision for credit losses was a recovery of 4.4 million for the six months ended June 30, 2025 compared to a provision for credit losses of $507 thousand for the same period in 2024, respectively.

The change compared to the same period in 2024 was primarily due to a decline in the Other segment reserve rate, specifically the Company’s largest credit relationship, from 12.01% at December 31, 2024 to 10.18% at June 30, 2025, and $16.4 million of curtailment payments made by the Bank’s largest nonperforming credit relationship, partially offset by loan growth during the six months ended June 30, 2025.

The recovery for unfunded commitments was a recovery of $449 thousand for the six months ended June 30, 2025 compared to a recovery of $279 thousand for the same period in 2024.

The change compared to the same period in 2024 was primarily due to decreased unfunded commitments in construction loans during the six months ended June 30, 2025.

The reserve for unfunded

CARTER BANKSHARES, INC.

1 unchanged sentence

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

commitments is largely comprised of unfunded commitments related to real estate construction loans and pressure on the reserve rates.

There are three basic factors that influence the reserve rates associated with unfunded commitments for real estate construction loans.

First, the reserve rate is extrapolated from the reserve rates calculated for certain commercial real estate funded loans within the ACL model.

These reserve rates are influenced by the same factors cited in the ACL model such as economic forecasts, average portfolio life, etc.

Refer to Note 1, Summary of Significant Accounting Policies, in Item 8.

Financial Statements and Supplementary Data for our ACL Policy, contained in our Annual Report on Form 10-K for the year ended December 31, 2024 .

Second, since the category of construction is generic, management applies a weighting of the reserve rates associated with certain CRE loans.

The proportion of these segments affect the weighting.

Third, volume changes impact the total reserve calculation.

Net charge-offs were $0.2 million for the three and six months ended June 30, 2025 compared to $0.3 million and $0.9 million for the same periods in 2024, respectively.

As a percentage of average portfolio loans, net charge-offs were 0.02% and 0.01% for the three and six months ended June 30, 2025 compared to 0.04% and 0.05% for the same periods in 2024, respectively.

At June 30, 2025, NPLs decreased $8.8 million since December 31, 2024.

NPLs as a percentage of total portfolio loans were 6.69% and 7.15% as of June 30, 2025 and December 31, 2024, respectively.

Net charge-offs were $0.4 million for the nine months ended September 30, 2025 and $16.4 million for the year ended December 31, 2024.

As a percentage of average portfolio loans, net charge-offs were 0.01% for the nine months ended September 30, 2025, compared to 0.46% for the year ended December 31, 2024.

During the year ended December 31, 2024, net loan charge-offs were significantly impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio.

At September 30, 2025, NPLs decreased $0.7 million since December 31, 2024.

NPLs as a percentage of total portfolio loans were 6.74% and 7.15% as of September 30, 2025 and December 31, 2024, respectively.

The following table summarizes portfolio loans past due 30-89 days for the periods presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024 $ Change

(Dollars in Thousands) September 30, 2025 December 31, 2024 $ Change

Loans 30 to 89 Days Past Due

7 unchanged sentences

Total Loans 30 to 89 Days Past Due $ 3,641 $ 4,828 $ (1,187)

Portfolio loans past due 30 to 89 days or more and still accruing increased $11.4 million to $16.2 million at June 30, 2025 compared to $4.8 million at December 31, 2024.

The increase is primarily attributable to $8.2 million of performing CRE loans that had matured at June 30, 2025, but had not yet been extended or renewed.

Also contributing to the increase are several credits in residential mortgages with four loans totaling $2.4 million and an additional credit of $4.5 million in the construction segment.

Portfolio loans that were past due 30 to 89 days or more and still accruing decreased by $1.2 million to $3.6 million at September 30, 2025, compared to $4.8 million at December 31, 2024.

The decline was primarily due to a $2.4 million CRE loan that moved to nonperforming status in the first quarter of 2025, partially offset by a $1.0 million residential mortgage loan that became 30 days past due in the third quarter of 2025.

CARTER BANKSHARES, INC.

2 unchanged sentences

The following tables represent credit exposures by internally assigned risk ratings at the dates presented:

June 30, 2025

September 30, 2025

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

15 unchanged sentences

Total Portfolio Loans $ 1,869,831 $ 230,483 $ 777,471 $ 28,908 $ 462,930 $ 255,203 $ 3,624,826

At June 30, 2025 and December 31, 2024, the Company had no loans that were risk rated as doubtful.

Special mention and substandard loans at June 30, 2025 decreased compared to December 31, 2024, with a decrease of $11.7 million in substandard and a decrease of $4.3 million in special mention.

The decrease of $11.7 million in substandard was primarily related to the previously mentioned $16.4 million curtailment payments received during the six months ended June 30, 2025 and a $1.4 million CRE relationship that paid off during the six months ended June 30, 2025, partially offset by a CRE relationship, consisting of four loans totaling $9.5 million that were downgraded during the six months ended June 30, 2025.

At June 30, 2025 and December 31, 2024 substandard loans were impacted by the above mentioned large nonaccrual credit relationship in the Other loan category, which was placed on nonaccrual status during the second quarter of 2023.

As of September 30, 2025 and December 31, 2024, the Company had no loans classified as doubtful.

The levels of special mention and substandard loans declined at September 30, 2025, compared to December 31, 2024, reflecting decreases of $6.2 million in special mention and $3.1 million in substandard loans.

The decline in special mention loans primarily related to a $4.4 million construction loan that paid off during the second quarter of 2025, as well as the previously mentioned $2.4 million CRE loan that was downgraded to substandard in the first quarter of 2025.

The decline in substandard was primarily related to the previously mentioned $23.4 million curtailment payments received during the nine months ended September 30, 2025 and a $3.4 million C&I payoff during the first quarter of 2025.

These declines were partially offset by the downgrade of a CRE loan of $14.6 million in the third quarter of 2025, the downgrade of the above CRE loan of $2.4 million from special mention to substandard during the first quarter of 2025, and $7.1 million CRE downgrades from pass to substandard in the first quarter of 2025.

Refer to Note 5, Allowance for Credit Losses, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the Company’s ACL.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table presents the composition of deposits at the dates presented:

(Dollars in Thousands) June 30,

(Dollars in Thousands) September 30,

2025 December 31,

8 unchanged sentences

The Company believes that the deposit base is stable and that the Company has the ability to attract new depositors while diversifying the deposit composition.

Total deposits at June 30, 2025, i ncreased $68.8 million , primarily due to $55.9 million of deposits assumed in the Branch Purchase.

The decrease in savings

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

was primarily due to customers preferences shifting to higher-yielding deposit products or repositioning funds into transactional deposit accounts.

Total deposits at September 30, 2025, i ncreased $56.9 million , primarily due to $55.9 million of deposits assumed in the Branch Purchase.

The decrease in savings was primarily due to customer preferences shifting to higher-yielding deposit products or repositioning funds into transactional deposit accounts.

The decrease in certificates of deposit was primarily due to clients diversifying a portion of their deposits into more liquid, interest-bearing demand and money market products.

At June 30, 2025 , noninterest-bearing deposits comprised 15.0% of total deposits compared to 15.3% at December 31, 2024 .

CDs comprised 44.8% and 46.3% of total deposits at June 30, 2025 and December 31, 2024 , respectively.

As of June 30, 2025, based on assumptions that the Bank uses to prepare its regulatory call report, approximately 81.5% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits, and approximately 18.5% of our total deposits were uninsured deposits over the standard FDIC insurance coverage limit.

At September 30, 2025 , noninterest-bearing deposits comprised 14.4% of total deposits compared to 15.3% at December 31, 2024 .

CDs comprised 45.3% and 46.3% of total deposits at September 30, 2025 and December 31, 2024 , respectively.

As of September 30, 2025, based on assumptions that the Bank uses to prepare its regulatory call report, approximately 81.6% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits, and approximately 18.4% of our total deposits were uninsured deposits over the standard FDIC insurance coverage limit.

The Company’s deposit base is diversified and granular and is comprised of approximately 78.2% of retail deposits.

The following table presents additional information in relation to deposits at the dates presented:

(Dollars in Thousands) June 30, 2025 December 31, 2024

Deposits from the CDARS $ — $ —

(Dollars in Thousands) September 30, 2025 December 31, 2024

Noninterest-Bearing Public Funds Deposits 17,852 55,385

6 unchanged sentences

This estimate was determined based on the same methodologies and assumptions used for regulatory reporting requirements.

Maturities of CDs over $250,000 or more, excluding brokered deposits, not covered by deposit insurance at June 30, 2025 are summarized as follows:

Maturities of CDs over $250,000 or more, excluding brokered deposits, not covered by deposit insurance at September 30, 2025 are summarized as follows:

(Dollars in Thousands) Amount Percent

4 unchanged sentences

Total $ 308,288 100.0 %

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

FHLB Borrowings and Federal Funds Purchased

Information pertaining to FHLB borrowings and federal funds purchased at the dates presented are summarized in the table below:

(Dollars in Thousands) June 30, 2025 December 31, 2024

(Dollars in Thousands) September 30, 2025 December 31, 2024

Balance at Period End

13 unchanged sentences

Federal Funds Purchased — % — %

Borrowings are an additional source of liquidity for the Company.

FHLB borrowings increased $105.5 million to $175.5 million at September 30, 2025 from $70.0 million at December 31, 2024 primarily due to additional FHLB advances to fund loan growth.

The Company had no overnight federal funds purchased at September 30, 2025 or at December 31, 2024.

The level and composition of borrowed funds fluctuates over time based on many factors including market conditions, loan growth, investment securities, deposit growth and capital considerations.

We manage our borrowed funds to provide a reliable source of liquidity.

The Company held FHLB of Atlanta stock of $11.6 million and $6.5 million at September 30, 2025 and December 31, 2024, respectively.

The increase in FHLB stock was due to a higher required level of stock holdings due to a higher level of FHLB borrowings.

Dividends recorded on restricted stock were $0.1 million and $0.4 million for the three and nine months ended September 30, 2025, respectively, compared to $0.2 million and $0.9 million for the same periods in 2024, respectively.

The investment is carried at cost and evaluated for impairment based on the ultimate recoverability of the par value.

We hold FHLB stock because we are a member of the FHLB of Atlanta.

The FHLB requires members to purchase and hold a specified level of FHLB stock based upon the members’ asset values, level of borrowings and participation in other programs offered.

Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB.

Members do not purchase stock in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise.

Rather, members purchase stock to obtain access to the products and services offered by the FHLB.

Unlike equity securities of traditional for-profit enterprises, the stock of the FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value.

Refer to Note 9, Federal Home Loan Bank Borrowings and Federal Funds Purchased, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the Company’s borrowings.

Liquidity and Capital Resources

Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost.

This includes the ability to satisfy the financial needs of depositors who want to withdraw funds or borrowers needing to access funds to meet their credit needs.

In order to manage liquidity risk the Company’s Board has delegated authority to ALCO for formulation, implementation and oversight of liquidity risk management for the Company.

The ALCO’s goal is to maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for potential liquidity stress events.

The ALCO closely monitors and manages liquidity by reviewing cash flow projections, performing

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

balance sheet stress tests and by maintaining a detailed contingency funding plan that includes specific liquidity measures that are reviewed by the ALCO monthly.

Our liquidity policy and contingency funding plan provide graduated risk tolerance levels for multiple liquidity measures and potential liquidity environments.

If our liquidity position moves to a level that has been defined as high risk, specific actions are required, such as increased monitoring or the development of an action plan to reduce the risk position.

The Company’s primary funding and liquidity source is a stable customer deposit base.

Management believes that we have the ability to retain existing deposits and attract new deposits, mitigating any potential funding dependency on other more volatile sources.

Although deposits are the primary source of funds, the Company has identified various other funding sources that can be used as part of our normal funding program when either a structure or cost efficiency has been identified.

Additional funding sources accessible to the Company include borrowing availability at the FHLB, equal to 25.0% of the Company’s assets or approximating $1.2 billion, subject to the amount of eligible collateral pledged, of which the Company is eligible to borrow up to an additional $544.0 million at September 30, 2025.

The Company has unsecured facilities with three other correspondent financial institutions totaling $30.0 million, a fully secured facility with one other correspondent financial institution totaling $45.0 million, and access to the institutional CD market, and the brokered deposit market.

The Company did not have outstanding borrowings on these facilities as of September 30, 2025.

In addition to the above funding resources, the Company also has $416.1 million of unpledged available-for-sale investment securities, at fair value, at September 30, 2025 as an additional source of liquidity.

Please refer to the Liquidity Sources table below for available funding with the FHLB and our secured and unsecured lines of credit with correspondent banks.

As of September 30, 2025, approximately 81.6% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits, and approximately 18.4% of our total deposits were uninsured deposits over the standard FDIC insurance coverage limit.

The Company closely monitors changes in the industry and market conditions that may impact the Company’s liquidity and will use other borrowing means or other liquidity and funding strategies and sources to fund its liquidity needs as needed.

The Company is also closely tracking the potential impacts on the Company’s liquidity of declines in the fair value of the Company’s securities portfolio due to fluctuations in interest rates and developments in the financial markets, and in light of developments in the banking industry that may change the availability of traditional sources of liquidity or market expectations with respect to available sources and amounts of additional liquidity.

An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets or assets that can be converted to cash quickly, with little or no loss in value, to meet financial obligations.

ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate and high.

At September 30, 2025, the Bank had $481.0 million in highly liquid assets, which consisted of Federal Reserve Board Excess Reserves and interest-bearing deposits in other financial institutions of $64.4 million, loans held-for-sale of $0.5 million and $416.1 million in unpledged securities.

This resulted in highly liquid assets to total assets ratio of 9.9% at September 30, 2025.

Total available liquidity to uninsured deposits was 157.1% at September 30, 2025.

If an extended recession, or significant industry or market volatility, caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding.

The following table provides detail of liquidity sources at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

Cash and Due From Banks, including Interest-bearing Deposits $ 106,948 $ 131,171

Unpledged Investment Securities 416,076 418,350

Excess Pledged Securities 77,520 33,022

FHLB Borrowing Availability 544,021 735,294

Collateralized Lines of Credit 45,000 45,000

Unsecured Lines of Credit Availability 30,000 30,000

Total Liquidity Sources $ 1,219,565 $ 1,392,837

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table provides total liquidity sources and ratios at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

Total Liquidity Sources $ 1,219,565 $ 1,392,837

Highly Liquid Assets 1 to Total Assets

Highly Liquid Assets 1 to Uninsured Deposits

61.9 % 66.8 %

Total Available Liquidity to Uninsured Deposits 157.1 % 182.6 %

1 Highly liquid assets consist of Federal Reserve Board excess reserves, interest-bearing deposits in other financial institutions, loans held-for-sale and unpledged securities.

Capital Resources

The Company reviews, on an ongoing basis, its and the Bank’s capital levels and opportunities to effectively deploy the Company’s capital or return capital to shareholders through stock repurchases or potential dividends.

The following table summarizes the actual risk-based capital amounts and ratios for the Company and the Bank at the dates presented:

(Dollars in Thousands) Minimum Required

Basel III Well

Capitalized 1

September 30, 2025 December 31, 2024

Amount Ratio Amount Ratio

Carter Bankshares, Inc.

Leverage Ratio 4.00 % NA $ 456,698 9.41 % $ 448,834 9.56 %

Common Equity Tier 1 (to Risk-weighted Assets) 7.00 % NA 456,698 10.66 % 448,834 10.88 %

Tier 1 Capital (to Risk-weighted Assets) 8.50 % NA 456,698 10.66 % 448,834 10.88 %

Total Capital (to Risk-weighted Assets) 10.50 % NA 510,557 11.91 % 500,759 12.13 %

Carter Bank & Trust

Leverage Ratio 4.00 % 5.00 % $ 448,086 9.24 % $ 441,916 9.42 %

Common Equity Tier 1 (to Risk-weighted Assets) 7.00 % 6.50 % 448,086 10.46 % 441,916 10.72 %

Tier 1 Capital (to Risk-weighted Assets) 8.50 % 8.00 % 448,086 10.46 % 441,916 10.72 %

Total Capital (to Risk-weighted Assets) 10.50 % 10.00 % 501,899 11.72 % 493,760 11.98 %

1 To be “well capitalized” under the prompt corrective action framework applies to the Bank only.

Total capital of $412.8 million at September 30, 2025, reflects an increase of $28.5 million compared to December 31, 2024.

The increase in total capital from December 31, 2024 is primarily due to net income of $22.9 million, an increase of $18.5 million in other comprehensive income due to positive changes in fair value of investment securities, partially offset by $14.2 million related to the repurchase of common stock that includes a 1% excise tax.

The remaining difference of $1.3 million related to restricted stock activity during the nine months ended September 30, 2025.

The Company and the Bank are subject to various capital requirements administered by the federal banking regulators.

Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulations to ensure capital adequacy require us to maintain minimum amounts and ratios.

Prompt corrective action regulations provide five classifications:

well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.

If adequately capitalized, regulatory approval is required to accept brokered deposits.

If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

At September 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action.

There are no conditions or events since that notification that management believes have changed the institution’s category.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements